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Blanket Business Income Insurance: The Best Choice for Complex Businesses?

When a business grows to the point where its operations involve multiple locations, purchasing the right type of business income insurance requires serious consideration.

Because of the many ways in which each location is interdependent with the others, insuring each facility as a separate entity with its own limit of insurance may no longer provide adequate coverage.

One effective solution is the use of “blanket” insurance: a single limit of insurance covering the combined business income exposure of all a company’s locations. These policies protect the income of larger, more complex businesses by essentially treating all their locations as if they were under one roof.

The following are a few important reasons why this type of coverage may be the right choice for protecting your business.

Coinsurance Penalties

A common and unpleasant experience when filing a business income claim is to be reminded of the coinsurance clause in your policy. Typically, this requires the insured to carry an amount of business income insurance equivalent to 50-80 percent (excluding payroll) of the insurable business income value for the policy year.

If the business is doing well and expanding, the insurable value can rapidly surpass the amount of business income insurance which was adequate at the start of the policy year. If the values are not reviewed on a regular basis and the amount of insurance increased, even a modest loss may trigger a coinsurance penalty.

With a blanket business income policy, the entire limit of liability is available to the policyholder if there is a loss at any of the company’s locations. This provides additional coverage for both property and lost income.

Warehouses

A serious property damage loss at a warehouse can reduce or completely eliminate a business’s ability to provide inventory to their retail outlets, with a predictable negative effect on sales at those locations. If standard individual policies were purchased for each retail outlet, the business interruption losses at these locations resulting from the loss at the warehouse would not likely be covered.

Sometimes the parent company may neglect to even list the subsidiaries as additional insureds on the policy. A blanket business insurance policy would provide coverage for all the retail locations. Physical damage to the warehouse would allow a claim to be filed for the resulting business interruption/ extra expense losses sustained across the entire network of outlets supplied by that facility.

When purchasing a blanket policy, it is sometimes incorrectly assumed that warehouses and distribution centers do not need to be included because they do not generate sales directly. This mistake can be as costly as not purchasing a blanket policy in the first place.

Transportation

For profits to be maintained, inventory needs to reach its destination on time. If transportation infrastructure such as roads and railway lines are damaged by a natural disaster, the resulting delays, increased fuel prices, and congestion across the whole system can mean a serious loss of income. The time element provisions of a blanket insurance policy would allow the insured to recover the lost income and additional expenses incurred while conducting business during this period.

Have questions about your property insurance claim? Feel free to contact Stark Loss for more information about how a Public Adjuster can help.

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