The Two Parts to Property Coverage-Direct Damage and Business Income

Written by
April 16th, 2012

The first thing a business owner needs to overcome is that it is possible that their business could be subject to a loss.  Tempting fate is not a good idea when you have the fiduciary responsibility of so many people and families – not to mention a business to keep running! Don’t think it can’t happen to you – it can! Accepting that fact is one thing…understanding how to protect yourself if something does happen is another matter. Understanding the components of property coverage is the first step. 

There are two parts to property coverage - Direct Damage and Business Income.  

Property Coverage – Direct Damage:
Protects the insured against loss or damage to the property itself.  Direct Damage Coverage (loss to tangible property) is only one piece of the total property protection you should have. 

Business Income/Extra Expense:
Responds to the resulting financial loss and  the additional expenses necessary to maintain the business, employees, and customers. 

These two parts of the property coverage would cover these basic adverse financial results that could happen as a result of a loss:

  1. The cost to repair or replace the damaged property itself.
  2. The additional cost to use substitute property and other resources. 
  3. The lost opportunity to use the damaged property to generate income/profit and pay expenses.
  4. Loss of customers and/or loss of goodwill.

For more information about business income from dependent properties, business continuation, business income worksheets or property insurance, contact knowledgebroker Scott Brookes.

About Scott
Scott has over 25 years of risk management, risk control, underwriting and leadership roles with insurance carriers.  He has detailed experience in large accounts, large property exposures including fire protection engineering, property valuation including building, business personal property, business income, and acting as a risk manager for insured’s.  In addition, Scott has written and taught a number of property training classes, property valuation classes, and business income valuation classes.


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