Commercial Property Ch. 7: Business Income Insurance – Flashcards
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Business Income Insurance
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Insurance that covers the reduction in an organization's income when operations are interrupted by damage to property caused by a covered peril.
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Net Income
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The difference between revenues (such as money received for goods or services) and expenses (such as money paid for merchandise, rent, and insurance).
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Profit
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Net income that results when revenues exceed expenses.
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Net Loss
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Net income that results when expenses exceed revenues.
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Continuing Expenses
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Expenses that continue to be incurred during a business interruption.
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Noncontinuing Expenses
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Expenses that will not continue during a business interruption.
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Extra Expenses
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Expenses, in addition to ordinary expenses, that an organization incurs to mitigate the effects of a business interruption.
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Dependent Property Exposure
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The possibility of incurring business income loss because of physical loss occurring on the premises of an organization that the insured depends on for materials, products, or sales.
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Coinsurance Basis
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The sum of the insured's estimated net income and operating expenses for the twelve months following policy inception, minus only those expenses listed in the form.
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Business Income Worksheet
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A worksheet for calculating the amount of insurance necessary to comply with the Coinsurance condition of business income insurance forms, for reporting business income values to the insurer, or for providing underwriters with information they need to evaluate an organization's business income loss exposure.
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Period of Restoration
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The period during which business income loss is covered under the BIC forms; it begins seventy-two hours after the physical loss occurs and ends when the property is (or should have been) restored to use with reasonable speed. (With regard to extra expense coverage, it begins immediately after the physical loss occurs.)
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Civil Authority Additional Coverage
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An additional coverage in a business income form, covering loss of business income and/or extra expenses that result when access to the insured's premises is prohibited by a civil authority because of damage by a covered cause of loss to property other than the insured's.
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Extended Business Income (EBI) Additional Coverage
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Coverage for business income losses that continue after the period of restoration ends; the coverage beings when the damaged property has been restored and ends when the insured's business returns to normal, subject to a maximum of thirty days.
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Extended Period of Indemnity
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An optional coverage that lengthens the duration of the extended business income (EBI) additional coverage for up to two years.
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Interruption of Computer Operations Additional Coverage
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Coverage for loss of business income or extra expense due to a suspension of operations resulting from an interruption of computer operations caused by destruction or corruption of electronic data as a result of a covered cause of loss.
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Maximum Period of Indemnity
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Option that deletes the coinsurance clause while limiting loss payment to the lesser of (1) the amount of loss sustained during the 120 days following the beginning of the period of restoration or (2) the policy limit
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Monthly Limit of Indemnity
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Option that deletes the coinsurance clause while limiting the amount recoverable during any month of business interruption to a stipulated fraction (1/6, 1/4, or 1/3) of the insurance amount.
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Ordinary Payroll
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The entire payroll expense (including employee benefits, FICA payments, union dues paid by the employer, and workers compensation premiums) for all employees of the insured except officers, executives, department managers, and employees under contract.
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Ordinary Payroll Limitation or Exclusion Endorsement
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Endorsement that limits coverage for ordinary payroll expenses to a specified number of days or excludes such expenses altogether, allowing the insured to satisfy the coinsurance requirement with a lower amount of insurance.
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Discretionary Payroll Expense Endorsement
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An endorsement that extends business income forms to cover payroll expenses for specified job classifications or employees regardless of whether such expenses are necessary to resume operations.
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Power, Heat and Refrigeration Deduction Endorsement
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Endorsement that eliminates power, heat, and refrigeration expenses from coverage and from the coinsurance calculation, allowing the insured to satisfy the coinsurance requirement with a lower limit of insurance.
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Business Income Premium Adjustment Endorsement
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An endorsement that bases the final policy premium earned by the insurer on the actual exposure as reported by the insured at twelve-month intervals.
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Business income Changes--Education Institutions Endorsement
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An endorsement that modifies business income coverage forms to make them more appropriate for covering the business income loss exposures of schools.
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Utility Services--Time Element Endorsement
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An endorsement that covers loss of business income or extra expense at the insured premised caused by the interruption o futility services (water, communications, or power) to the insured premises.
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Ordinance of Law--Increased Period of Restoration Endorsement
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Endorsement that covers business income loss during the additional time required to comply with building ordinance or laws.
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Business Income
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Sum of (1) net profit or loss that would have been earned or incurred if the suspension had not occurred and (2) normal operating expenses, including payroll, that continue during the suspension.
