4 Property Insurance Policy Features to Review as Hurricane Activity Continues
Businesses continue to recover from Hurricane Harvey. Hurricane Irma is rapidly approaching the US coastline. And Hurricane Jose is gathering speed in the North Atlantic. Amid this activity, it’s important for risk professionals to understand how their property insurance policies will respond to these and other catastrophic events. Here are four areas that property owners should understand in the initial stages of their claim preparation.
Deductibles: Do they apply by occurrence or location? Are there separate deductibles for property damage and time element? Is there a waiting period? There may be separate deductibles for flood and for named windstorm, which may be expressed as dollar amounts or as a percentage of values.
Business interruption: How will your business interruption (BI) claim amount be measured? Calculation of BI — which is part of time element coverage — and contingent business interruption (CBI) claims can be complex. These policies are designed to protect insureds from loss of business income that would have been earned had the covered loss or damage not occurred. It is important to fully understand how a loss impacts that business income.
Supply chain: Contingent business interruption (CBI) provisions generally reimburse lost profits and extra expenses resulting from an interruption at the premises of a customer or supplier from a loss of the type covered by your policy. What impact could suppliers and customers impacted by an event have on your business?
Time and distance limitations: A lengthy power outage or other service interruption can cost you customers and profits. Where included, coverages triggered by those events can have day or hour qualifiers and can also been limited by distance in feet or miles.
As part of any claim filing, it will be helpful to prepare a written summary of your losses and compile documents you may need. Among other things, this should include:
- Financial information, including fixed asset register and depreciation records, profit and loss statements for the two years prior to the event for all affected locations, budgets and forecasts prepared before the loss to show anticipated loss results, and purchase orders or estimates of all contracts for repair or replacement of damaged assets.
Expenses incurred in cleanup and recovery, including payments to third-parties and payroll records for employees that reflect the specific hours worked, tasks performed, and pay and overtime rates. A unique accounting code should be used to capture all costs associated with recovery efforts.
Detailed records of physical damage and the costs to repair or replace property to pre-loss condition.
The most recent physical inventory.
Managing the effects of a catastrophic storm on your business can be a long and complicated process. By reviewing your insurance coverage early on and laying the groundwork for a claim, you can better position your organization to more quickly return to normal operations and maximize your insurance recovery.