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Understanding Business Interruption Insurance Coverage

“Here today, gone tomorrow.” An old familiar phrase, but never a welcome one when it pertains to a business. But should the worst happen, an option to keep your business on its feet is readily available.

Business interruption insurance helps businesses protect against monetary losses due to periods of suspended operations when a covered event, such as a fire, occurs and causes physical property damage. The coverage allows businesses to pay fixed expenses, including costs incurred while operating at an offsite location, while the property is closed for repairs and restoration. Policies also reimburse owners for lost revenue that would have otherwise been earned if the business remained open.

Business interruption coverages are typically bundled within a businessowner’s policy (BOP), a commercial package that includes business property and liability coverages or a standalone Commercial Property policy. Most insurers offer this coverage feature for accounts that they are willing to insure.

According to the Federal Emergency Management Agency (FEMA), about 25% of businesses fail to reopen after a disaster strikes, making business interruption coverage even more critical for the long-term survival of an enterprise. While commercial property insurance pays for actual physical damages or losses, a business interruption policy covers lost net income due to the closure of the business while repairs are underway, as well as offering coverage for rent or lease payments, relocation costs, employee wages, taxes, and loan payments. Exclusions from coverage include losses unrelated to property damage, such as lost revenues due to viral outbreaks or pandemics.

Business interruption policies may contain a clause for civil authority coverage, as well, meaning that if a state, local, or federal government entity prohibits access to the business premises, thereby forcing the business to temporarily close, this clause in the business interruption insurance may cover lost income.

Should a calamity strike, you certainly want to be able to say about your business, “Here today, still here tomorrow.” Business interruption coverage holds the key. Contact the professionals at The Reschini Group to learn more and determine the right plan for your business.

https://content.naic.org/cipr-topics/business-interruptionbusinessowners-policies-bop

The Reschini Group provides these updates for information only, and does not provide legal advice. To make decisions regarding insurance matters, please consult directly with a licensed insurance professional or firm.

Which Consumer-Driven Health Plan Is Right for Your Business?

Consumer-driven health plans like health savings accounts (HSAs), flexible spending accounts (FSAs), and health reimbursement arrangements (HRAs), can help soften the blow of continually rising health care costs, but it’s important to understand what each option requires and provides. Here are brief descriptions of the similarities and differences concerning HSAs, FSAs and HRAs:

HSAs

Due to their tax-favored status, HSAs require individuals to meet these qualifications:

Be covered by a high deductible health plan (HDHP)
Not have any other health coverage (with some exceptions)
Not be claimed as a dependent on another person’s tax return
Not be covered by Medicare

The employer and employee can contribute to the HSA in the same year, subject to annual limits. Employers may allow employees to make pre-tax salary reduction contributions to fund their HSAs. Individuals may roll over unspent funds in the HSA from year to year. Since the HSA is a tax-exempt account owned by the employee, he or she may keep the account upon termination of employment or retirement.

FSAs

Health FSAs provide a means for employees to reduce their income tax liability through salary reduction. The Affordable Care Act (ACA) limits employee’s pre-tax contributions to their health FSAs to $3,050 (adjusted for inflation for future plan years). Since only employees can participate in a health FSA, self-employed individuals can establish health FSAs for their employees, but cannot set up their own accounts. Also a “use-it-or-lose-it” provision, meaning that employees must use every dollar in the account by the end of each year, which can lead to overfunding the account and then spending unnecessarily at the end of the year to avoid forfeiting the money. Some options for protecting those unused funds exist, but it is best to check with a qualified benefits expert first.

HRAs

HRAs allow employees to use employer contributions to pay for (or reimburse) eligible medical care expenses. HRAs can only be funded with employer money, and unused HRA balances may accumulate from year to year. There is no specified cap on the amount an employer is allowed to contribute to an HRA. Also, an HRA is not subject to the uniform coverage rule that applies to health FSAs. Like health FSAs, only employees can participate in an HRA, which means that self-employed individuals cannot participate in an HRA on a tax-favored basis.

Introducing consumerism into your health plan requires an evaluation of the benefits and disadvantages of HSAs, FSAs and HRAs. No single solution is right for every employer. If your organization is considering implementing a consumer-driven health plan, the Benefits team at The Reschini Group can help determine the best plan for you.

Insurers Are Partners in Mitigating Cyber Risk

Cybersecurity risks continue to expand nearly unabated. While it can feel like trying to hold back a tidal wave with a bath towel sometimes, effective tools do exist and can be easily accessed.

What must always be remembered is that a commitment to resilience and pre-emptive mitigation remains imperative. Insurers are well-positioned to serve not only as financial first responders but as partners in managing these evolving hazards, along with their business associates and partners.

According to the Insurance Information Institute, “The first line of defense is creating a robust cybersecurity system, training employees on how to identify a potential attack, encrypting company data, and enabling antivirus protection. With only half of businesses reporting a consistent encryption strategy, and the cost of data breaches continuing to rise, organizations must do more to protect themselves and their customers.”.

Some commonly seen cyber liability risks include:

Liability—You may be liable for costs incurred by customers and other third parties as a result of a cyber attack or other IT-related incident.
System recovery—Repairing or replacing computer systems or lost data can result in significant costs.
Notification expenses—In several states, if your business stores customer data, you’re required to notify customers if a data breach has occurred or is even just suspected.
Regulatory fines—Several federal and state regulations require businesses and organizations to protect consumer data.
Class action lawsuits—Large-scale data breaches have led to class action lawsuits filed on behalf of customers whose data and privacy were compromised.

To extend cyber liability insurance coverage requires the purchase a stand-alone cyber liability policy, customized for your business to cover several types of risk, including:

Loss or corruption of data.
Business interruption.
Multiple types of liability.
Identity theft.
Cyber extortion.
Reputation recovery.

Contact the professionals at The Reschini Group for more information and guidance on obtaining the proper level of cyber liability insurance coverage for your situation.

The Protection of Coinsurance

Securing appropriate insurance for your business and property can be enough of a process on its own. So what does the concept of coinsurance represent? Nothing less than protection for both the insured and the insurance provider.

Let’s start with defining our terms. Coinsurance is a property coverage provision set by your insurer that requires you to carry coverage for a certain percent of your property’s value. That way, your insurer can be sure you have adequate coverage if you need to make a claim, and it can ensure that its resources are adequate to cover that claim.

In a typical commercial property insurance policy, a coinsurance clause ensures that you carry adequate coverage to protect your assets. For instance, for an office building valued at $200,000, you would need at least $200,000 in property insurance coverage. If your policy has a clause with a coinsurance percentage of at least 80%, that means you must insure the building for at least $160,000. If you purchase less coverage, the insurance company may not pay out the full value of your damages, even if they fall within the limits of your policy.

Say you file a claim after a fire causes $100,000 worth of property damage. Your property insurance policy has a limit of $150,000 and a $5,000 deductible. Per your coinsurance clause, you were required to purchase at least $160,000 in coverage. Because you failed to meet your coinsurance percentage of 80%, you will face additional costs as determined by the ratio of the amount you carried divided by the amount that was required: $150,000 / $160,000 = 0.937. So if your loss was $100,000, your insurer will pay $93,700 minus your $5,000 deductible. Your total costs will end up being $11,300.

Not every insurance company includes a coinsurance clause in its policies. However, those that do require coinsurance typically have three reasons for doing so:

To ensure clients have adequate coverage.
To protect their pool of resources to better handle real-world claim situations.
To encourage accurate assessment and underwriting.

The bottom line? When you’re required to meet coinsurance limits and do so, you’re more likely to make an accurate assessment of the value of your assets, which protects the insurance provider and you in the long term. Contact the professionals at The Reschini Group for more information on coinsurance and how it can apply to your business coverage.

Don’t Rely on Luck to Get Through the Next Health Crisis

Some people live by the credo, “I’d rather be lucky than good.” But as the Covid-19 pandemic taught us, it’s foolish to rely on luck alone to manage your business through a major health crisis. Complete and comprehensive preparation must take precedence.

Covid became a true turning point for many workplaces. The Human Resources function now is expected to understand public health challenges swiftly and manage them efficiently. So, how to prepare? Here are four steps to success:

Assess the Risk to the Organization
Employers must remain updated on federal and local health guidance to help inform organizational strategies, while also considering questions like: Are employees at a heightened risk by being in the workplace during this crisis? What safety protocols will keep employees safe?
Adapt Quickly
Based on the risk assessment, employers must be prepared to adapt quickly, ensuring that safeguards in place don’t force employees to choose between their jobs and their health.
Communicate Thoroughly
At every stage, employers should keep employees in the loop. This means sharing the outcome of the risk assessment and clearly communicating any new workplace protocols. Employees should never have to wonder how their workplace is handling a crisis.
Embrace Change
During the early months of the pandemic, it took far too long for some businesses to adapt. Employers should be ready to make these decisions swiftly, and must embrace the changing landscape. This might mean having some employees work remotely while others remain in the workplace. Employers should think about such contingencies and be prepared to follow through if a public health crisis necessitates it.

Responding to the next health crisis will be much easier when you have planned and prepared ahead of time. Don’t leave it to luck. There’s too much at stake. Reach out to the Benefits team at The Reschini Group for more workplace guidance.

Surge in Cyber Attacks Accelerates Need to Secure Coverage

A sharp rise in the number and size of ransomware losses over the past three years is changing the availability and cost of cybersecurity insurance coverage, according to the Insurance Leadership Forum. Annual cyber liability rates have increased more than 40% in recent years, in fact.

Insurance providers are carefully managing the growing risk, with some scaling back coverage options for business customers and others continuing to make coverage widely available because the threat is both ever-present, growing and evolving rapidly.

Some insurers continue to make this coverage available to customers with whom they have a wider relationship. Certain insurers have elected to only write cyber liability for companies with less than $100 million in revenue to reduce the insurer’s exposure.

These factors combine to make the need for cybersecurity insurance more urgent than ever, and to secure adequate coverage at reasonable rates. Contact the professionals at The Reschini Group to learn more about available cybersecurity coverage that’s right for your business.

Making a Disaster Worse: Insufficient Documentation When Filing a Claim

Floods, fires, tornadoes. Business owners purchase insurance to protect their property and people against these types of disasters. But what happens when, should the worst occur, you can’t adequately prove what that property was worth, or the financial impact your people are suffering?

It may sound like the most obvious point in the world, but it’s important to have accurate values – and the documentation to prove them to an insurance adjuster. Some good news is that this is not so much an issue impacting your premiums, but it can become a major issue when filing a claim to recover your losses.

The Insurance Information Institute recommends the following:

— Collect any relevant business records that you will need to prove the value of damaged equipment, inventory or structures that you are including in your business insurance claim. Gather all financial documents including tax returns, monthly sales tax returns, business contracts, budgets, financial statements and other documents pertinent to calculating the projected income of your business.

— If the business is forced to close down, you will need to provide information on the cost of conducting business from a temporary location, detailed records of business activity, and a list of expenses that have continued while your business has been suspended such as advertising, utilities, etc. Loss of or damage to cars, vans, trucks or specialty vehicles, which can hamper your ability to operate your business, should also be reported.

One of the smartest and easiest ways for a business owner to limit risk is to make sure you know – and can prove – what the various elements that make up your business are worth.

Contact the professionals at The Reschini Group to learn more about insured-to-value coverage for your enterprise.

Offering Coverage for Employee Mental Health

Among the many lasting effects of the COVID-19 pandemic is the impact on mental health. Months of isolation, coupled with anxiety about job security and physical health, followed by the economic stress from inflation and supply chain issues, have helped to fuel lingering mental health challenges for millions – including your employees.

In fact, while more than one in five Americans have diagnosable mental disorders at some point in their lives, only about half of them receive professional mental health treatment. One main reason – seeking access to such treatment – can be attributed to whether the person’s employer offers mental health benefits.

Under the Affordable Care Act, non-grandfathered health plans in the iCndividual and small group markets are required to cover mental and behavioral health treatments as one of the 10 essential health benefits. That means most fully insured group health plans sponsored by small employers (typically those with up to 50 employees) must include coverage for mental health benefits. Also, health plans must comply with the Mental Health Parity and Addiction Act of 2008, which prohibits group health plans (and health insurance issuers providing mental health and substance use disorder benefits) from imposing less favorable benefit limitations on those benefits than what they impose on surgical and medical care.

Beyond the legal and policy compliance considerations, however, providing adequate mental health benefits also makes economic sense. More employers have come to recognize that the cost of lost productivity due to employees suffering from mental health issues exceeds the cost of providing adequate mental health benefits coverage.

Options available to employers to help address these issues include:

Using Employee Assistance Programs to remove the stigma of mental health treatment and to help offset the cost of treatment, so that more employees seek help.
Making mental health screenings more widely and easily available to employees.
Offering employee education initiatives.
Enlisting the help of primary care physicians to bring mental health considerations into the overall picture of assessing employee health.

The U.S. Department of Labor has more information on mental health at www.dol.gov. You can also contact the Benefits team at The Reschini Group for more information and guidance on this important topic.

CEO Awareness, Involvement Crucial in Cybersecurity

While it may be tempting to leave the complex, mysterious world of cybersecurity to “the experts,” business leaders cannot fall back on that handy escape hatch any longer. They need to be aware and involved, even to the point of elevating cyber reporting to the CEO directly. According to the federal Cybersecurity and Infrastructure Security Agency*, here are some practical steps that leaders would be wise to follow:

CEOs should ask the following questions about potential cybersecurity threats:
How could cybersecurity threats affect the different functions of my business, including areas such as supply chain, public relations, finance, and human resources?
What type of critical information could be lost (e.g., trade secrets, customer data, research, personally identifiable information)?
How can my business create long-term resiliency to minimize our cybersecurity risks?
What kind of cyber threat information sharing does my business participate in? With whom does my business exchange this information?
What type of information sharing practices could my business adopt that would help foster community among the different cybersecurity groups where my business is a member?

What can CEOs do to mitigate cybersecurity threats?

Elevate cybersecurity risk management discussions to the company CEO and the leadership team. Executives should construct policy from the top down to ensure everyone is empowered to perform tasks related to reducing cybersecurity risk.
Implement industry standards and best practices rather than relying solely on compliance standards or certifications. Compliance standards and regulations (Federal Information Security Modernization Act) provide guidance on minimal requirements. Businesses should strive to go beyond the minimum, however.
Evaluate and manage organization-specific cybersecurity risks. Ask the questions necessary to understand your security planning, operations, and security-related goals.
Ensure cybersecurity risk metrics are meaningful and measurable. For example, reducing the days it takes to patch a vulnerability to directly limit risk to the organization.
Develop and exercise cybersecurity plans and procedures for incident response, business continuity, and disaster recovery. It is critical that organizations test their incident response plans across the whole organization, not just in the IT environment.
Retain a quality workforce. It is important to have people who can identify the proper tools for your organization, since new cybersecurity threats are constantly appearing.
Maintain situational awareness of cybersecurity threats. Subscribe to notifications on emerging cybersecurity threats (e.g., National Cyber Awareness System products, MITRE Common Vulnerability Exposures, CERT Coordination Center Vulnerability Notes) and subscribe to the Homeland Information Sharing Network.

Of course, making sure your cybersecurity insurance coverage is sufficient and current remains vitally important, as well. The professionals at The Reschini Group can help.

* https://www.cisa.gov/tips/st18-007

The Reschini Group Launches New Website

The Reschini Group’s website, www.reschini.com received an exciting upgrade and redesign over the holiday weekend.

The new site features a dynamic responsive homepage with clickable links to the most important content pages and functionality you may use for your customer service or informational needs:

The website also features resources about many key issues your organization may face regarding Property and Casualty, Employee Benefits, or Cybersecurity issues. Plus, the site archives the Reschini blog – a useful library of pertinent information about recent issues in the market and economy.

Take a moment to look at the new site and let me know what you think!