Business Insurance Checklist Part 3

6. War Clauses

This is a clause in an insurance policy that states losses incurred as a result of war are excluded in coverage. Although the term war has many definitions, Barron Wall tells us that most insurance companies have accepted the definition as set forth in the Causes of Loss (Special) Form (CP 10 30 06 95) and Business Owners Special Property Coverage Form (BP 00 02 01 97).

Although war clauses are in most policies covering property, some have terrorism exceptions with the stipulation that the actions were not part of armed forces activities in the country where the property is located. It behooves every business owner to make sure this exception is in their policy.

7. Business Interruption Insurance

This is a common type of insurance that covers losses due to disrupted or interrupted business because of damage. Rodman says it is "designed to cover actual loss of income due to loss of physical property. It is designed for those situations where the loss at the site directly triggers a loss of income to the business."

For instance, if the location of your company is crucial to your revenue—such as a retailer or manufacturer—business interruption insurance is important. Going back to the September 11 attacks, many businesses had utility interruptions, and suppliers and customers could not reach them. "Many business owners may not realize that a policy covering property damage loss will not cover a business income loss unless the policy is specifically endorsed to provide this coverage," explains Wall. "Similarly, coverage for the other types of losses... is also generally not automatic but has to be negotiated and bought, sometimes at an additional premium cost."

An example of a business that would not be overly affected by the damage to property is the service industry. For example, a temporary placement agency might be able to operate a few blocks away where there is phone service in a case like the September 11 attacks, and would not be affected much by interrupted phone service. The electronics store next to them might be devastated, and would need to be covered by business interruption insurance.

Checklist Part 4