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"Business Income Made Simple"
   By Robert M. Swift

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The following questions and answers are for your information. The content is believed to be accurate, but it is not guaranteed.

How do I keep track of what we did during the disaster recovery?
A Claims Journal is a diary that recounts the pertinent details of the loss. It would include answers to questions such as what happened, when, where, and what was done to recover from the disaster. You will want to identify costs or lost income amounts, as well as keep a folder of photographs to document your journal entries. This information is only for the business owner and should not be given to anyone else. Keep the journal throughout the recovery and claims process as it may take several months to be fully resolved.

How do I notify my insurance company of my loss?
Notify your insurance professional and use a claims submission form to establish
communication with the insurance adjuster. The insurance agent will usually use an "ACCORD" form for first notice of loss.

What should I tell my insurance company?
They will want to know what happened, when, where, and how much damage was done. Be honest and open with them, and give them all the information they

How do I present my property losses?
Discuss with the adjuster the scope of the job and who will do the work. The adjuster will assess the amount of damage and a preliminary amount of repair or rebuild work. Get estimates, take lots of pictures, and keep receipts for everything you do.

How do I calculate my Business Income loss?
Project what your sales should have been during the recovery period, and compare that to what you sales actually were. The difference is your lost sales. Then subtract Discontinuing Expenses, like cost of materials and supplies. This is your lost income amount. Add to that all the Extra Expenses incurred to recover as quickly as possible, and you have your combined lost income and the Extra Expense claim amount.

Refer to your daily/weekly journal as you compile your documentation and complete your calculations. Identify and document any lost new business or existing key accounts and any special agreements you made to keep from losing vendors or customers, such as free shipping, expedited shipping (air versus truck), or discounts given to retain customers, etc.

You will need to supply the adjuster with two or three years of tax reports, two years of Profit and Loss reports, and two years of monthly payroll records showing standard pay, overtime, commissions, and bonuses. Remember, if the officer bonus is a normal business expense with historical justification, you can pay those bonuses during the recovery period.

To document Extra Costs Incurred, copy all receipts and compile a report categorizing these costs into property purchases, service charges, rents, staff costs, subcontracted costs, etc.

How do I present my Business Income loss to the insurance company?
Give them a worksheet showing a monthly sales comparison for at least two years. This establishes the trend of the business and shows the amount of lost sales during the recovery period. Next, show the historic cost of sales and subtract that amount from the projected lost sales. Finally, add the total amount from the Extra Expense worksheet listing all the Extra Expenses you have incurred.

If an insured includes coverage for Ordinary Payroll, it provides the ability to make a claim for Ordinary Payroll, but only to the extent that the payroll claimed went to people necessary to return to business. For example, a restaurant suffers a fire and the insured makes a claim for the payroll of the dishwasher, who was kept on the payroll, but is not a key or hard-to-replace employee. If all employees are necessary, the claim could be made for all, as the coverage is there, but only to the extent that they are necessary. Since the dishwasher is not even involved in restoring operations, no coverage is afforded. Is all payroll covered if people are not working?

Ordinary payroll is defined as all the people below a department manager. Extra Ordinary payroll is defined as executive officers, directors, and managers; plus there is a feature to add key personnel to Extra Ordinary payroll. To avoid this, never let this situation occur. ALL payroll will be reimbursed during the recovery. The restaurant should have a Contingency Plan that states they will use all their employees periodically; for example, as manual labor clean-up, driving to various locations to pick-up material and supplies, paperwork completed at home, etc. However, if there is absolutely no activity, then perhaps some people should be terminated, but that should be the insured’s decision. The coverage forms we have seen do not state that employees have to be working in the business or performing their previous jobs.

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