Do You Have Time Element Insurance? Learn About It Now and Set Up a Consultation!

March 2, 2020

If your business is the victim of a fire, fallen tree or some other unfortunate event, you will likely not be able to operate out of your normal location until the property is repaired. Most of the time, this does not happen overnight, so you may incur significant lost revenues and sunk costs, such as rent, during the repair process. Time element insurance policies help keep your finances afloat while you wait for your building to reopen. Being well-informed about these policies is very important so that you know which policy is best for your business and can look out for loopholes, such as high premiums or exclusions.

Also known as business interruption insurance, time element insurance covers a variety of expenses related to an event that temporarily halts the operations of a business. These include profit loss, service interruption, soft costs, rental income and more, and coverage ultimately depends on how long your business was interrupted and the extent of wasted resources. There are two ways of calculating how much your policy will cover: gross earnings and gross profits. The gross earnings method subtracts saved expenses such as raw materials or utilities from total net lost sales. The gross profit method applies the business’s historical gross margin to the total loss of sales. You will need supporting documentation to supplement either method, such as bank statements or invoices from the time your business was unable to run, as well as invoices from contractors responsible for repairing your building.

While the above criteria cover regular time element insurance and applies only where there is physical damage to the insured’s property, contingent time element (CTE) coverage applies to the property of customers and suppliers. The customer or supplier must incur the same type of physical damage that is covered under the insured’s policy. For a business to recover under a CTE policy, it must prove that the losses suffered were a direct result of the damage to a customer’s or supplier’s property. This can be done by providing contracts and timetables of the supplier and insured’s relationship and showing a direct causation of lost sales for the insured to the damaged property.

We know that discerning the differences between time element policies can be confusing, so let us do the work in picking out the right policy for your business. Contact us today to get started.


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