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Business Income on the BOP

Posted on 1/2/2012 by Administrator Account

One of the most difficult insurance coverages to understand and establish adequate limit is Business Income Insurance. The BOP has simplified the process by including Business Income automatically, with no separate limit of coverage; subject typically to a maximum of twelve months of coverage.

One of the most difficult insurance coverages to understand and establish adequate limit is Business Income Insurance.  The BOP has simplified the process by including Business Income automatically, with no separate limit of coverage; subject typically to a maximum of twelve months of coverage.  Often times business income on a BOP is referred to as an "actual loss sustained" coverage and the BOP Declaration often times indicates ALS rather than an amount of insurance.

The concept of offering business income with no limit or sublimit is how the original BOP was constructed.  Also, however, originally the BOP had very limited eligibility typically designed for a small habitational, service or retail business.  Now that so many companies have expanded their eligibility to more complex categories and larger risks, some companies are including more restrictive language on their Business Income on a BOP.  Some carriers are including language that they will pay the lesser of the actual loss sustained or the limit of insurance on the policy (wherein they are actually including a limit).  Other carriers are putting a maximum on Business Income based on the type of insured. Specifically this is done for risks such as manufacturers wherein a carrier might put a maximum based on sales revenue.  Other carriers are including internal limits based on a specific type of equipment similar to an Inland Marine form of insurance.

It is important to look at your company's specific policy form and read the language carefully.  All too often on a summary of insurance or a proposal we include the initials ALS for the BOP when, in fact, carriers may no longer be writing true ALS.

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