Valuing Business Income Exposures

ADJUSTERS INTERNAT IONAL . COM 3 A D J U S T I N G T O D A Y …blanket insurance responds as if the entire company, regardless of the number of locations, were under one roof. “ ” the agreed value option on the revised values is called for. 2) If the new statement of values is not filed on time, the coinsurance requirement applies until a new agreed value filing is made. Again, in a growth business, an insured can outgrow the current amount of coverage — and any loss after the expiration of the agreed value option will almost certainly result in a coinsurance penalty. When the agreed value option is used, great care should be taken to be sure that valuations are accurate and that subsequent filings are made at renewal or when otherwise required. Blanket Coverage — the Answer for Complex Businesses When a business is more complex, involving two or more “fire divisions” (separate but adjoining structures, each with its own property insurance rate) or locations, the problem of arranging adequate business income insurance also becomes more complex, requiring that the agent, broker or insurance consultant have a full understanding and appreciation of the insured’s business operations. The most basic method of insuring such an operation is to have a separate item of coverage — each with its own limit of insurance — for each separately rated fire division or location. This works well when there is no overlap or interdependency among any of the locations. However, where interdependency exists, problems can arise. These problems can best be resolved though the use of “blanket” insurance: a single limit of insurance covering the combined business income exposure of all locations. The blanket method of insuring the business income exposure for organizations with more than one location should always be contemplated and often recommended by the insurance consultant — especially when the various locations of the business operations are interdependent upon one another. Failure to recognize and identify this interdependency can severely reduce the insurance recovery.