This Insurance Can Help You Survive Another Business's Disaster

This Insurance Can Help You Survive Another Business’s Disaster

In October and November of 2011, floods inundated large parts of central Thailand, including thousands of factories that made everything from automotive parts and hard disk drives to eyeglass lenses and air conditioners. In addition to the human and economic cost in Thailand, the disaster affected businesses around the world.

Carmakers in Detroit shut down because they could not get the parts they needed and half of the world’s hard disk drive production was wiped out, leaving computer manufacturers with stalled assembly lines. When disasters like this occur, businesses around the globe feel the effects.

In addition to making advance arrangements for alternative suppliers, businesses can protect themselves by purchasing two types of insurance coverage: Contingent business interruption, and supply chain insurance.

Contingent business interruption

Contingent business interruption insurance, also called business income from dependent properties, pays for a business’s lost profit plus continuing expenses when it must slow or stop operations because of damage to another business’s property.

These other businesses can be customers or suppliers. For example, if a motorcycle dealership was left with no bikes to sell because its supplier in Japan suffered a fire, the insurance would make up part of the lost income.

The damage must result from a cause of loss that the insurance policy covers, such as fire or a hurricane. This is important because standard property insurance policies do not cover losses caused by catastrophes such as floods and earthquakes.

Supply chain coverage

Supply chain insurance takes contingent business interruption a step further. It covers income lost because of damage to a supplier’s or customer’s property. However, it also covers losses resulting from events that do not cause physical damage. These may include:

  • Labor disruptions
  • Production process problems
  • Trade disputes
  • Wars
  • Political turmoil
  • Closed roads, bridges, railroads and shipping channels
  • Public health crises
  • Actions by regulators
  • Financial difficulties

Businesses often have different tiers of suppliers, with key suppliers in the top tier and less important ones in the lower tiers. It is common for them to insure only the top tier.

However, insurers are increasingly offering multi-tier coverage. This applies to the business’s entire supply chain. Multi-tier coverage provides a more comprehensive solution for the business while also spreading out the insurer’s risk.

Some insurers offer options. One lets policyholders choose between measuring losses in terms of gross earnings or number of units from the supplier. Some also offer agreed-value coverage, which eliminates penalties for buying amounts of insurance less than the amounts of value at risk.

Businesses should determine where they are vulnerable to supply chain losses and develop back-up plans for dealing with unexpected disruptions. These could include reserves of the needed supplies and contracts with alternative suppliers.

Insurance can help the business recover from a supply chain loss after the fact. Advance planning can help make that loss as small as possible.

If you would like to know more about business interruption insurance, don’t hesitate to contact us.

BGES Group’s office, located in Larchmont, NY is a full service insurance agency offering, Property, Liability, Umbrella Liability, Business Auto, Bid & Performance Bonds, Inland Marine, Worker’s Compensation, New York State Disability, Group Health, Life insurance, Personal lines and Identity Theft.

BGES Group are Worker’s Compensation Specialists for the States of New York, New Jersey and Connecticut – Issues we address: 1) Lowering pricing – we have specialty programs that can save you up to 40%; 2) Finding a new company; 3) Replacing policies that are being cancelled or non renewed; 4) Audit disputes; 5) Company creating fictitious payroll at audit time; 6) Lowering high experience modifications factors; 7) Misclassification of payrolls; 8) Lowering or eliminating renewal deposits;   9) Getting coverage when you’ve been without for a few months; 10) Covering multiple states under one policy; 11) Eliminating 10% service or policy fees; 12) Timely issuance of certificates; 13) Always being able to get someone on the phone or by email when you need to.

Special Contractor Insurance Programs (NY, NJ, CT) – We we have 50+ insurance companies to market your general liability, umbrella liability, business auto, workers compensation, bid & performance bonds and group health coverages.  We help contractors set up proper risk transfer mechanisms.  If you’re a contractor we offer extensive information about insurance markets, coverages, risk transfer mechanisms, subcontractor screening, ways to lower your insurance costs that lower them.

Need More Work, Customers, a Plan B To Generate Massive Cash Flow To Cover Business and Personal Expenses?  Click here to learn more.                        


If you would like to speak with us call Gary Wallach at 914-806-5853 or click here to email or click here to visit our website.

Company: BGES Group, 216A Larchmont Acres West, Larchmont, NY 10538



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