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Time Element Coverage – Often Overlooked

When a business owner looks into purchasing property insurance, they often times do so with the intention of insuring the value of their building, stock, personal property or equipment. After all, that is what is asked of them when attempting to satisfy the requirements of the banks and lending institutions that are loaning out the funds to purchase such property. What seems to go repeatedly unnoticed, however, is the indirect loss that can result from the destruction of critical property, such as loss of profit. 

For example, a business who manufacturers and produces noncritical airplane parts buys a new facility in Everett, WA that will allow them to accept new orders, maximize production, and ultimately increase revenue. The bank requires them to hold property insurance on the value of the building to insure they will be covered in case of loss. With that, the business owners take out a policy that includes building coverage and some coverage for the equipment that is being used in the manufacturing process. A couple months later, the building catches fire and burns to the ground. Although there would be coverage for the value of the building, there would be nothing in place to keep the business in operation, keep key employees, provide protection for reduced sales, and help restore the insured to their original position. This is where business income coverage comes in to play.

The purpose of time element coverage (business income) is to protect a company’s financial statement and provide coverage for lost profits and those expenses that are continuing and necessary for operation. If the company referenced above had business income coverage in place, not only would their necessary bills continue to get paid, but the profit shown on the financial statement would be replicated and paid out by the insurance company. Admittedly, this coverage is more pertinent for businesses like the one described above as opposed to a contractor who makes their money out in the field, but it is important nonetheless to be aware of the indirect losses that can take place when a building or key piece of equipment is damaged beyond immediate repair.

Cyber Liability & Network Security – Protecting what 3rd Parties Don’t.

Every decade the insurance and risk management industries come across new-found exposures and the need for enhanced coverage for commercial entities. In today’s marketplace, a set of newly minted exposures has outpaced the others and that is Cyber Liability and Network Security coverages.
With all the news in the media surrounding data breaches of major corporations across the world, the loss of customer data has been pushed to the forefront. Whether it is Target or most recently Home Depot, businesses large and small are feeling the effects of both domestic and foreign network hacking. In these larger instances, companies are staffing their IT departments and much of this information is kept in-house. In the case of most small to medium-sized businesses, they have outsourced this exposure and rely on 3^rd parties. The problem is, and what many don’t realize, when you outsource IT and your database storage, you don’t necessarily relieve yourself of the liabilities that come along with attaining that information through your day-to-day operations.

Your organization is fully responsible for the safety and security surrounding this information. In turn, it must be taken into consideration when developing your overall insurance/risk management program. The exposure to loss will either be insured or retained. Whether you buy insurance for this or not, at least the decision is made in advance, based on your business exposures. Which seems much less problematic than the alternative; trying to decide after the fact, the best course of action for dealing with a data breach and the potential law suits that follow.

By K.L. “Mac” McIntosh III, CIC, CRM