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| BI Select |
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In North America, Business Interruption (BI) coverage is most often offered on a Gross Earnings basis. In other parts of the world, BI is more often written on a Gross Profits basis. Affiliated FM makes both options available to clients as each has its respective strengths.
In certain losses, one coverage may be more beneficial to the client than the other coverage. This is why Affiliated FM offers the BI Select endorsement. This endorsement allows clients to choose between Gross Earnings and Gross Profits coverage after the loss happens. This gives ultimate flexibility to ensure the client is indemnified to the maximum benefit of either coverage.
- Production based coverage with a period of interruption that extends through the time it takes to reasonably repair or replace the property lost.
- Extended period of indemnity is available which provides a window after the period of interruption to get sales back to pre-loss levels.
- Sales lost that are not directly attributed to the loss of property are not covered during the period of interruption.
- Sales based coverage that adjusts the loss on the total affect to sales caused by the loss. This can include lost sales that are not directly attributed to property damage.
- Period of interruption is limited to 12 months
- There is no extended period of indemnity to allow for sales to return to pre-loss levels.
For a further demonstration on how each may react, read the following example.
A manufacturer has two products, Product A and B. Customers of product A prefer to order product B from the same vendor that they buy product A from. Production line A is damaged but production line B is unaffected by the loss. This insured experiences a shut down of line A for 3 months while repairs are made. During those 3 months they lose 3 months of revenues from product A. Furthermore, because customers can not order both A and B from this insured, customers cancel orders for product B.. Because line B was not damaged, any loss of revenue from line B during the 3 month shutdown would not be covered by a Gross Earnings form. Once the repairs are made and the client enters their "Extended Period of Indemnity", loss of sales for both products would be indemnified.
On the other hand, sales from both product A and B would be recoverable under Gross Profits coverage. However once the repairs are made after 3 months, assume it takes another 3 months for this insured to get customers back. With Gross Profits coverage there is no extended period of indemnity that they could recover lost sales in those 3 additional months. Furthermore, let's say that it took 15 months for production line A to be repaired. The time limit on Gross Profits coverage would limit coverage to 12 months leaving no coverage for the remaining 3 months of lost sales.
If the client has BI Select, they are able to have the loss adjusted under both forms and chose the one that provides the better coverage.
For more information please contact your Production Underwriter.
This information is provided for purposes of illustration only, and does not constitute, replace, or supplement actual policy language. Each loss must be examined with reference to its own particular facts and circumstances, in light of applicable policy language. The liability of Affiliated FM is limited to that contained in its insurance policies.
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