Actual Loss Sustained

One of the most misunderstood parts of business insurance is business interruption. Our explanation should give you a certain comfort level with the terminology so that you can understand the discussion you will likely have with your adviser.

Actual loss sustained is a form of business interruption insurance where no sum insured is specified but you are covered for the total amount of the loss you have as a result of the claim. This is a Gross Earnings-type form that does not have a specific sum stated. Gross Earnings forms stop paying the moment the property is restored to its former condition.

Business Interruption coverage can include expenses, payroll, and profits. Would you need to immediately relocate? An example is if you have a men's wear store. If the damage is sufficient that you will be months before you can re-open your store then you need to find another location right away. Your customers will go somewhere else if you do not provide the service they need. This is when you might be considering some Extra Expense coverage as well as your business interruption insurance. Yes, insurance often comes in layers.

Is it important that you have payroll funds so you do not lose important employees? There is a saying in business that the only thing harder then finding the good employee is keeping the good employee. The training you have provided to make this person expert will have to be spent again and might possibly not yield the same results. Again, the actual loss sustained could be minimized if your employee has wages paid as you are getting set up to open up your men's wear store. It is not unusual for this relocation and re-opening to take 90 days or more. Be sure to check if there is a limitation on the amount of days that payroll is covered.

Would it take longer then usual to rebuild your building due to by-laws, dense traffic area or other restrictions? it is logical that it will take longer to rebuild in an already developed area. Heavy equipment will need to be brought in and debris removal can be expensive and time consuming. There can be a significant difference between reconstruction costs and original construction cost. If there could be others affecting decision-making on the repair or restoration then you need to consider a Gross Profits form. Your Actual Loss Sustained policy stops paying when the work stops.

Is your equipment or product very specialized? This can be part of the Extra Expense coverage when it is ordered in from overseas or specially made. You might consider having an agreement with a competitor for temporary loss of use of equipment. If this is not possible then duplication of some specialized parts might be a good investment.

The breakdown of your equipment could also cause a loss of income. You would have to consider equipment breakdown or boiler and machinery coverage. This specialty product will include some extra expense funds to help you get up and running again quickly.

Talk this over with your agent or broker - it is important that you choose the package that is best for your potential loss.