4 ADJUSTINGTODAY.COM (electricity, water, steam, heat, communications, etc.). Coverage for off-premises interruption of services typically requires addition of an offpremises service time element endorsement, and the type of service to be covered must be specified. Considering the impact of inflation, how can a business anticipate the proper amount of business income insurance to guarantee adequate coverage for the worst possible loss that might occur? ANSWER: While inflation has been creeping rather than galloping for some time now, it is still good to anticipate changes in rates of inflation, especially in different sectors of the economy. Apart from careful and continued analysis of its business plans and economic prospects, there are three insurance methods a firm can select among to ensure adequate coverage for a future income loss. First, an insured can select an agreed value approach to income coverage. Under an agreed value endorsement to a business income coverage part, the insured is typically required to prepare an annual income statement for the previous 12 months, plus estimates of changes in income over the coming year. An agreed value limit is established on the basis of the reported values, eliminating the coinsurance requirement typically found in other methods of settling income losses. A word of caution: When the agreed value approach is used, new values must be reported within a reporting period specified in the endorsement. If a report is not filed on time, coinsurance automatically applies until a new report is filed. (Even though business income and extra expense are covered under one limit, extra expense coverage is not subject to coinsurance.) Other options include endorsements providing income coverage for: • A maximum period of indemnity (typically 120 days after an interruption); or • Amonthly limit of coverage for the restoration period. In either case, the insured has greater certainty regarding recovery, but assumes the risk of being underinsured for a loss. Photo Here
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