Restoration Insurance: What is Business Income Insurance?

Business Income (or business interruption insurance) protects restoration contractors from the loss of income when their facility suffers a disaster that forces it to close.  While a property insurance policy covers the physical damage or loss to a restoration contractor’s property, a business income insurance policy will cover the business for lost profits and expense payments.

This type of policy is usually purchased in conjunction with a property insurance policy.   An important note is that a business income policy will only pay if the claim is one that is covered by the property policy.

A business income policy can include coverage for the following:

  • Profits- Profits that would have been earned.
  • Fixed Costs- Operating expenses and other ongoing costs.
  • Temporary Location- Some policies provide extra expense coverage to help with moving to and operating from a temporary storage location.
  • Extra Expenses- Reimbursement for additional expenses (beyond normal costs) a business incurs to continue operations.

All business income policies will include a specified time period for which the insurance company will provide coverage.  Policies may provide coverage for as little as 3 months while some include coverage for up to 2 years.

If you have questions of whether your restoration company should purchase a business income policy, we recommend you speak with one of our experts agents.   We can evaluate your company’s operations to determine if a business income policy is right for your company.

Restoration Insurance: What is Coinsurance?

Coinsurance is a clause built within every property insurance policy.   If you don’t carry the proper property insurance limits, this clause will cause significant headaches when trying to settle claims.

What is Coinsurance?

Coinsurance is a contractual requirement within your policy that you agree to insure your property at the correct limits, typically specified by a percentage (80%, 90%, or 100%).   If, at the time of the loss, it’s determined that the insurance limits is less than the value of the property, then you become a “co-insurer” with the insurance company.

Why does the insurance company “punish” you for not carrying proper limits? It’s because most property losses are partial losses.  For example, less than 2% of fire losses result in a total loss and 86% of of fire losses actually result in damages less than 20% of a building’s value.  So without a proper incentive, most insureds would be inclined to purchase limits much less than their actual property values.

An Example

Let’s say you own a building worth $1,000,000.  However, knowing your statistically most likely to experience only a partial loss to your property, you decide to insure the building for only $500,000 (50% of its actual value).   There is a fire to the building that causes $150,000 in damage to the building.   As the insurance company evaluates the claim they determine that you had only purchased insurance at 50% of the value of your building.

The insurance company would then invoke the coinsurance clause from your policy which, because you had insured the building at 50% of its value, would only pay 50% of the claim, which in this case would be $75,000.   You would then be left to pay for the additional $75,000 of the claim.

ARI Brokers can help you determine the proper property limits for your company.   Our expert staff will help you evaluate all of your property exposures and the determine the right limits to avoid any coinsurance penalties.

Why Does an Restoration Contractor Need Electronic Data Protection Insurance?

An often overlooked insurance coverage for restoration contractors is Electronic Data Protection insurance.   In the event of a claim this insurance can save you and your staff hours of headaches trying to restore the electronic data that was lost.

What Does Electronic Data Loss Insurance Cover?

1. Lost or damaged electronic data

EDP coverage as it is commonly known provides insurance to replace or restore your electronic data that is lost as a result of a covered claim.  For example, if a fire to your building destroys your computers, then your standard property policy would only pay to replace the hardware.   EDP would pay to replace the data stored on those computers.

2. Interruption of Computer Operations

Data loss can severely impact a business.   So if you have Interruption of Computer Operations included on your policy, then the insurance company will provide coverage for loss of actual income and extra expenses if you cannot operate your business due to the data loss.

What Doesn’t Electronic Data Loss Insurance Cover:

1. Your liability due to data loss (not a third party)

Most electronic data protection policies do not any liability coverage.  So if an electronic data loss incurs any liability to a third party, then you most likely do not have any coverage.

2. Your mistakes

EDP insurance typically will not cover any losses due to mistakes in processing electronic data, or mistakes made in the design, implementation or support of your computer systems or networks, unless those mistakes result in a covered claim that subsequently destroys the data.

3. Employee actions

EDP insurance usually will not provide any coverage for losses to electronic data if those losses are a result of your employees’ actions, whether intentional or not.

For restoration contractors this coverage can be invaluable.   The cost to restore electronic data like drawings, bids, etc.  can be extremely cumbersome and expensive.

If you are interested in getting a quote for the cost of Electronic Data Protection, please don’t hesitate to give our office a call.

Resotration Insurance Tips: Is There Insurance Coverage Available for Tools?

A contractor’s tools and equipment are often the lifeblood of their company.   Loss or destruction to their tools could mean a tremendous loss to the company and its revenues.  Given that fact, we are often asked about providing insurance coverage for tools and equipment that are located in our clients’ vehicles or even left at a job site.

The first place most people start to insure all of their property is through a standard property policy.   And a property policy is great for personal property, inventory, including tools and equipment, and machines – as long as the property never leaves the premises.  A property insurance policy only provides insurance coverage for property as long as it is located within a 1000 feet of the location listed on the policy.  Most property insurance policies exclude any property that is located away from the premises, whether it’s in a company vehicle or located a job site.

How Do Restoration Contractor Insure Their Tools?

For restoration contractors a standard property insurance policy just isn’t sufficient enough to cover their tools and equipment.  As most of their tools and equipment are usually inside a company vehicle or at the actual job site.

For restoration contractors, we recommend purchasing a miscellaneous tools floater and/or an equipment floater to properly protect your property that is located away from the premises.

What Is a Miscellaneous Tools Floater?

A miscellaneous tools floater provides coverage for tools and other small equipment while it is away from your premises.  The policy is designed to cover smaller pieces of equipment (less than $2,500 in value).   In fact, most policies will actually cap the amount they will pay per item at an amount between $1,000 – $5,000.   One of the benefits of the misc. tools floater is that some policies will even provide additional coverage for employees’ tools while they are in a company vehicle or located at a job site as well.

What Is an Equipment Floater?

An equipment floater provides essentially the same coverage as the miscellaneous tools floater, but it is designed to cover larger tools and pieces of equipment – $5,000 in value and above.  Typically, you will schedule your pieces of equipment on this type of policy by listing the type of piece, year, make, model, and replacement cost value.   Your premium is then calculated based upon the replacement cost amount listed on the equipment schedule.

Adding Coverage

Adding a misc. tools floater or equipment floater insurance policy is actually quite simple.   The easiest way is to take your existing inventory/equipment list and determine which items can be placed on the tools floater and which pieces need to be scheduled on an equipment floater.   From there you can work with your agent is providing you with insurance quotes on the items.

If you are a restoration contractor interested in insurance quotes for your equipment please feel free to give our office a call.


Why Knowing What Your Building is Made Out of Can Save Restoration Contractors Thousands on their Insurance

During the insurance application process, your insurance agent will typically ask you what type of construction the building you own or lease is made out of.   If you own your building, you will typically know the information off the top of your head.  However, if you are leasing this question can be a little more difficult. 

This question is very vital to insuring your restoration company.   Depending upon the type of construction of your building, the rates can vary up to 50 percent of the base rate.   Also, answering this question incorrectly can cause you some significant headaches in the event of a claim, and could potentially result in the insurance carrier denying a claim.

To help out, I want to provide a brief summary of the various construction types along with a short description of each.  This way when the question comes up on the insurance application, you will know how to properly answer it.

1.     Frame: Buildings with exterior walls, floors, and roof of combustible construction (i.e. wood).

2.     Ordinary, Joisted or Brick Joisted (Joisted Masonry): Building with exterior walls of brick, concrete, concrete block or stone.  The roof, floors, and their supporting joists, beams, and columns are combustible wood construction.

3.     All Steel or Preengineered:  Both the roof and walls are constructed of light gage steel or aluminum sheet metal. 

4.     Masonry Noncombustible: Buildings that have walls made of masonry materials such as brick, hollow concrete block or concrete.  The floors and roof, including their supports are entirely noncombustible.

5.     Fire Resistive: Buildings designed to withstand the damaging effects of an interior fire for a specified period of time, typically 2 hours.

The construction types listed above start from the most expensive (frame) and go down to the least expensive (fire resistive).  Finding out the construction of the exterior building is typically pretty easy; however, if you’re a tenant it may take some research or help from your landlord to find out what the interior wall and roof construction is of the building. 

When your agent is forced to guess, we will typically place your building in the frame class code.  This means you will pay more premium, but it is the only way we can guarantee that a claim will be paid in the event of a fire when the construction type isn’t known.