Business Income and Extra Expense Coverage for Schools
Have you reviewed your business income and extra expense coverage? Have you verified the policy language regarding the extended period of indemnity as it relates to this coverage? There are many scenarios to consider when reviewing your coverage. But first, let’s take a quick step back.
The principle behind business income insurance is to provide a school, whose operations have been interrupted by a loss, with income equal to what would’ve been enjoyed had the loss not taken place. Your insurance company wants you to stay in business and so do your students. The extra expense portion is designed to minimize the additional costs/expenses related to the interruption of your operations: For example, renting an alternate or temporary location.
There’s also the extended period of indemnity which provides additional time for the delay in momentum to be regained: For example, recouping student enrollment numbers, if a loss adversely impacts enrollment. Typically this extended coverage is offered for 30 days. We recommend considering 12 months or more, if available. Without this extension, coverage ends when the property is restored to full operation. Not taking into consideration the impact of reduced enrollments on the projected budget and growth plan.
We also have to consider the timing of the loss. Are you prepared if the loss occurs in the beginning of the school year or near the end of the school year? How might this impact enrollment and tuition income? As we have reviewed, timing and length of restoration will have different impacts on your school.
Do you have your plan together outlining potential loss scenarios, pre-identified alternate locations and cost exposures? We suggest you keep these issues in mind as you prepare or review your recovery plans. Then take another look at your insurance policy to verify you are appropriately protected.
Talk with a member of our ‘A’ Team for more proactive solutions to disaster or loss recovery. In the meantime check out our Business Income Limit Calculator to learn more about the potential cost of a loss.
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