Net Income Loss Exposures

Your property has adequate and appropriate coverage against fires, windstorms, collapses, even airplane strikes. What happens to the income loss during renovation?

Some companies spread this risk by maintaining two or more manufacturing plants, or the business can be handled through remote offices temporarily. How about your business?

Let's assume you lose your main building for six months. Will the income loss be devastating? Will additional costs and expenses continue and drive you to the brink of bankruptcy?

Indirect losses can include production costs, extra expenses to operate, even extra expenses to deal with an unfamiliar supplier because your main source just burned down.

Review your sources, suppliers, infrastructure and determine the value of these items to your income stream. Do you absolutely need your physical plant, or would it be relatively easy to rebuild elsewhere? What net income would you lose while rebuilding? What expenses would continue regardless?

What are the critically important resources? Do you have a supplier who would be impossible, difficult, or costly to replace? How about your power supply. Do you have alternatives, or is this a one-source problem?

Each of these issues are a source of extra expense, loss of income or loss of net income exposures. Normally, this coverage is added to a fire coverage or even included in a business owner’s policy. Check with your agent and find out what options you have.

Take some time to prepare an emergency plan for your business. Your loss control service provided by your insurance company can help.

In the plan, begin with onsite issues like critical need machinery, buildings, equipment, or personnel. Move off campus and consider suppliers, power sources, customers, transporters, raw materials dealers, or retail outlets.

Anyone indirectly serving your company or buying from your company is a potential indirect loss. Suppose you're the supplier and your biggest client burns to the ground, cutting off six months worth of sales. Do you have a contingency plan?

Emergency planning followed by insuring these potential losses can save your business.


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