What is Co insurance Business Income Coverage Form?

Answer 1

Business Income coverage seeks to make the insured whole in the event of a covered physical loss of property such that operations are impaired or must cease in the event of covered causes of loss such as fire, theft and vandalism. To write the coverage, a limit (dollar figure) must be established to determine policy limit and associated premium. A Business Income Worksheet is often used to determine this amount which equates to 100% of annual business income for such losses. However, an insured may know or believe that there is no possible way to lose 100% of all annual due to the ability to resume full operations and collection of business income as if no loss had occurred. In these cases, the insured can declare up front that the amount they are requesting to be insured is only a percentage of the annual total. The percentage is often 50% for businesses who can get back up and running very quickly. Typically however, a coinsurance of 90% is automatically applied by your agent as a way of allowing the insurance company to communicate the following to the insured: You must accurately calculate 100% of annual business income within 10% or we will penalize you for underinsuring. It is important to note that AFTER the loss occurs, the insurance adjuster WILL determine the accuracy of your calculation and if you were mistaken, i.e. you insured for $50,000 at 50% but should have insured $100,000 at 50%, the insurance company will impose at coinsurance penalty to your settlement. This is a mechanism by which the insurance company forces the insured to 'insure to value', meaning DECLARE 100% of values, even though your limit may be lower, so that you are covered to policy limits with no coinsurance penalty at the time of loss.