Full Coverage – Do You Really Have It?
When a business loss happens, after ensuring people are safe, the first thing most leaders will do is dig out their insurance policy. Between scanning their policy and calling their insurance representative, they will start to ask questions such as:
- Will the full extent of our loss be covered?
- What exactly can be claimed in this particular situation?
- Does the business have full coverage in place for these losses?
- What should I do first?
After a flood, fire, theft or other insured loss event, you need to review your insurance policy and activate the claims process as soon as possible. Before a loss event, there are steps that you can take to ensure that when your business is interrupted by a loss, the full replacement value of damaged insured property and assets will be covered.
What is Full Coverage? Total Insurable Value?
The International Risk Management Institute (IMRI) defines full coverage as “Any form of insurance that provides for payment in full (e.g., without a deductible or coinsurance limitation) of all losses caused by the perils insured against.”1
IMRI also confirms that total insurable value is “A property insurance term referring to the sum of the full value of the insured’s covered property, business income values, and any other covered property interests.”2
Total insurable value – also known by the acronym TIV – is typically used in property insurance policies for businesses and other organizations that insures against damage to an organizations buildings, contents to a covered cause of loss, such as a fire, flood, windstorm etc. A commercial property policy may also cover loss of income or increase in expenses that results from the property damage.
Why Is A Correct TIV So Critical?
Your full value or TIV is an important number for all commercial property policies because it is typically the number that’s applied against the rate to determine your premium. For example, a $1,000,000 TIV x $0.4 (Commercial Property Insurance Rate per $100 of TIV) divided by 100 equals a $4,000 annual premium.
How To Add Up Your TIV And Get Full Coverage
Add together the total value of all property, equipment, inventory, tools, etc. at each location. Your insurance broker will also provide you with a business income worksheet. This form is used to estimate an organization’s annual business income for the upcoming 12 month period. Your business income limit of insurance adds together the sum total of all of these amounts.
The selected percentage (or multiple) of your organization’s estimated annual business income for the next 12 months is based on how long it will take to replace all damaged property and resume operations in the event of a worst-case loss. For some organizations, this period may be more than 12 months. Most insurers require a completed business income worksheet in order to activate the business income agreed value coverage option.
Contact an ALIGNED Insurance Advocate to learn about tools, resources and steps you can take ensure you have full coverage for all of your business assets.
Sources: 1, 2 IRMI.com
