melloInsurance

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Lyndon Block

How can business interruption insurance protect me?

There are many interruptions in life, some are good, some are bad. Children interrupting you, although cute, can be slightly annoying. Someone who is talking to you is interrupted by their cell phone ringing; quite common. An unborn child coming sooner than the expected “birthdate;” exciting, terrifying, all the emotions.  A Tornado deciding to drop by and remove half of your barn & re-locating your livestock; slightly inconvenient. Or a boiler explosion in your manufacturing plant. “Heads up!” These are scary scenarios that can cause some serious disruption in your day to day and can interrupt your business workflow.

What can be done?

The first few scenarios can be handled by adjusting your expectations. For the later two, you might need an actual game plan. Typically, people insure their buildings, equipment, tools, vehicles & finished products (stock) and that is mostly what they are concerned with. However, there are many businesses that would be in serious trouble if they do not insure for “business interruption.”  

Okay, so what is this “business interruption” coverage?

Business Interruption Insurance covers the loss of income that a business suffers after a disaster. Despite insuring the assets of your business, you may be unable to continue your business operation for 6 to 12 or even 18 months after the loss. While the demolition/rebuild is underway, you are continuously losing revenue. The unfortunate part is that you will likely continue having expenses throughout this time: Payroll, Mortgage, Taxes, Other business Loans, Utilities, etc. Now, if you aren’t able to bring in revenue, how will these expenses get paid? This is when business interruption coverage kicks in.

There are different types of business interruption coverage terms to keep in mind:

  1. Gross Profits Form – This covers the loss of net profit following the reduction in revenue, standing charges and any increased costs of business. For example, you need to rent a building or equipment to continue business operations temporarily. This is suitable for businesses in retail & manufacturing sectors.
  2. Gross Revenue Form – This covers the reduction in revenue following the loss and any increased costs. This is suitable for businesses in the service industry – accountants, solicitors, hotels.
  3. Actual Loss Sustained – This covers the actual loss sustained by the insured as a result of the physical loss insured by the policy. This only applies when the insured actually sustains a business interruption. If he is able to continue operations immediately following the loss, this coverage does not kick in.
  4. Extra Expense – a necessary expense that the insured was required to make, to prevent further damages in an unexpected loss. For example, you have a sewer backup and you quickly react by buying a sump pump, rent a hydro vac and other expenses to prevent the sewer backup from hitting your mechanical room and equipment therein. If sewer backup coverage is on the policy, the loss is covered and the costs to prevent further damage will also be covered under this extra expense provision.
  5. Period of Restoration – this is to determine how long your business could be down during a loss; aka: “Worst Case Scenario.” With this timeframe in mind, the value of business interruption coverage can then be calculated.  

So let’s use an example:

You have a kitchen-cabinet business. You generate $600,000 Gross, annually. Your shop value with debris removal is $500,000. You have $200,000 in tools and equipment and $150,000 of pre-finished cabinets finished inside. You have purchased a comprehensive contractors policy with business interruption and data recovery. Some dust catches fire by the saw in the shop and burns down the shop, equipment, tools and pre-built cabinets. As predicted, the main items are insured and covered on the policy. You’re now looking at how you can continue business while your shop and equipment is rebuilt/re-ordered. The expected timeframe to get the debris cleaned up and another shop built and operational is 12 months. Two months later you are able to find another shop in town to rent use their tools. This coverage extends to the time you were down without any income while searching for the shop. It covers the rent payments for the rented shop/equipment and it covers any additional business costs that are required to continue business operations as usual.

Calculations:

  • 2 month down = $100,000 revenue lost to cover cost of expenses (Payroll, Mortgage, etc.)
  • Shop/Tool Rental is $7000 per month for 10 months = $70,000.
  • Additional costs to transport products to/from rental shop = $10,000
  • Debris Removal Costs = $20,000
  • Shop Rebuild = $480,000
  • Cost to replace tools & equipment = $200,,000
  • Inventory/Stock = $150,000
  • Data Loss / Recovery (Accounts Receivable, Payables, etc.) = $25,000

Total insurable loss = $1,055,000                   Total business interruption loss: $180,000

So who needs this coverage?

This is  decided on a case by case basis. Not every business is the same and therefore the risks are all different. You may have a welding shop or be a mobile welder, and so one may require this coverage and the other may or may not depending on his circumstances. It is important to be as thorough as possible when explaining the nature of your business to your insurance broker, this will help us design the coverage that will best fit your business. We do not want you left stranded in a pile of ashes with bills piling up. We are here to help bail you out of those terrible situations. Being detailed with us, helps us to make sure those loopholes are filled.

When tragedy or crisis hits, the last thing you want to be worrying about is where are you going to find your next paycheck. Let us take care of those details for you so you don’t have to. As always, thanks for reading and take care!

My truck just fell through the ice….now what!?


We live in Saskatchewan. Which means 3 things: you bleed green, you know what a combine is, and you know how to survive winter 11 months of the year. I might have exaggerated………just on the combine one, the point is, winter is here and it is here for a while. So we have to make the most of it. That means it is time to go out for a rip to the fishing shack!

If you live in this glorious province that has an unlimited bounty of frozen lakes and tundra, you may know, or in fact, BE, a die hard ice-fisher (New word of the day). Get the ice-auger and a few beverages and make your way across the frozen pond, where you can enjoy yourself trying to catch that elusive slippery fish.

Now this is all fine and dandy, but what happens in the event that the ice isn’t as thick as you thought and your trailer or truck ends up falling through the ice? We have all seen the instagram or snapchat photo showing some redneck digging a truck out of the ice-water with a backhoe. We don’t want that to be you! But if that redneck turns out to be you or a close relative, you may need to know if you’re actually covered on your insurance.

Truth is, SGI does not have a magic number of how thick the ice needs to be for you to be “approved” to drive onto the ice. We were able to find a guide to show an approximate thickness allowance for certain vehicles. This is shown below. Even though these guidelines are complete speculation, they give you an idea of what weight can be placed on certain thicknesses of ice.  

SGI states that if a claim were to occur from a vehicle falling through the ice: “As long as it was reasonable for the customer to believe that the ice would hold the weight of the vehicle, then you should be covered for any loss or damage to your vehicles. If the customer saw large patches of open water or he tried to hydroplane his snowmobile or anything risky; those would be scenarios where a claim could be denied.”

Try to break up the winter with some quality ice fishing time, and just know that, as long as you believe the ice is thick enough for your vehicles, then you’ll be covered. It is better to be safe than sorry, so it wouldn’t hurt to check out the depth of the ice prior to driving your new Super Duty onto it. Cheers!

Mandatory Alcohol Screening

During this Christmas season there will be many parties to attend. Whether they are work parties, family gatherings or a New Years Eve party. Whatever the agenda is, it is important to always plan a safe ride home.

Effective December 18th, 2018, New legislation has passed – Bill C46 – which allows law enforcement to conduct mandatory alcohol and drug screening tests. This means that if you are pulled over or are pulled into any random check stop across the country, a police officer can demand a breathalyzer test be taken even if the motorist has no signs of impairment. Prior to this bill being passed, an officer had to have reasonable grounds to pull you over.

Provincial legislation had also changed the impaired driving legislation limit to .04 back in 2017. This meant tougher penalties for a lower legal limit. Penalties such as having your vehicle seized for up to 3 days, attending an impaired driving education program and possibly having your drivers licence suspended. There is a zero tolerance for drivers under the age of 21. The criminal offence still is effective at .o8. For more information on impairment penalties, please click here.

Also, to help with the prevention of impaired driving, effective December 14th, 2018, Ride sharing companies such as Uber & LYFT are now available. If you choose to be a driver for one of these programs, you may need to upgrade your drivers license and amend your personal auto pak to a commercial auto pak to extend coverage properly to this ride sharing operation. Please contact your broker for more information or a quote on these coverages.

We want you to have a safe and Merry Christmas and Happy New Year. Please enjoy the holidays with your family and friends.

 

 

 

 

 

Is there a reason I have identity theft coverage?

Remember a couple weeks ago when we spoke about the importance of having someone checking your home while away on that warm vacation that you “won” by taking that telemarketer survey?  Well, unfortunately that trip resulted in having your information getting stolen and your personal identity being compromised. Credit cards were forged and now you have charges in your name that shouldn’t be there!  Why oh why was that telemarketer so convincing? Now you are sitting in a world of hurt and anguish, you are confused and have misplaced emotions, and wondering how you will escape the clutches of this unfortunate event.  You grab your favorite blanket, lay down on the sofa and proceed to have yourself a good cry as you wonder what to do.


Suddenly it dawns on you and you stop your panic.  The clouds of broken trust and fear begin to roll back with the glorious blue sky and warm sun shining down on this situation.  You remember that your insurance provider has got you covered! Most companies offer a minimum of $10,000 of identity theft protection that will help you get your life back in order.  This coverage will kick in to cover the costs of getting new documents produced, as well as kick in to cover unauthorized credit card charges that might exist. This coverage can be used any time you suspect that your identity has been compromised.  The claims process is started simply by contacting your broker who will open up a claim on your behalf with your insurance company. Submitting a claim for this type of loss may cause a change in premiums due to discounts being affected, so be mindful of that fact if you should decide to pursue this option.


Identity theft protection.  Who knew you would ever need such a coverage?  Your broker did that’s who! Once this whole disaster blows over and what was lost has been returned, make sure you take the time to thank your broker and maybe even bring them that Iced Cap that they love so much.  Brokers know that they often look like the hero, but deep down they are just regular people that want to help and see your problems through.

No matter what happens in the future, keep your broker close.  You never know when you will need them to help you out of the proverbial hole you find yourself in!

 

I’ll have a blue….blue….blue skies vacation?

It is officially that time of the year again where the thermometer never rises as high as we like, and things like wind chill are deciding factors on what outfit we will choose for the day.  The sun seems to remain hidden for longer than we like, and the malls begin to get busier and busier until Christmas. Families begin to plan schedules for the holidays, and that free trip to a warmer climate that the telemarketer promises after stealing your identity seems to look like a more attractive offer all the time- I mean, after all, is a little bit of identity retention worth this kind of cold?  Fourteen days in the sun couldn’t sound more glorious at a time like this!

A few days away from home is something we all desire, but are there ramifications with your insurance if you choose to spend some time away?  Well, lucky you asked, as this is the very place to find out the answer to that very question.

If you plan to be away for more than 72 hours in the winter time, there are stipulations tucked into your home insurance product that state the importance of having a competent person checking on your home at least once a day to keep all coverage in place.

You see, the last thing the insurance companies want is for someone to leave their home for a number of months in the heating season and simply trust that their furnace will continue to work without being checked on.  Even with smart homes and remote temperature monitors being available, they still want little Johnny stopping by to make sure the pipes haven’t burst due to a furnace malfunction, and that everything remains in proper order.  Having someone stop in also ensures that an unfortunate event, such as the “wet bandits” stopping by for some free merchandise, hasn’t occurred (forgive me for the Home Alone reference). Things like theft, vandalism or accidents such as a broken window can cause big problems in the middle of winter.  Your furnace will have to work harder to keep the house warm, and there is no guarantee that it will be able to do that with a broken window in the house, or that it will continue to operate under increased load without malfunction.

Some home security companies install thermostats that they can monitor the temperature remotely. If the temperature of the home drops, they will send someone to inspect the home to see what has caused the issue. This is another alternative if you are unable to find someone you trust to check on your home. Most insurance companies allow this as an alternative if the “temperature of the home is monitored by a third-party vendor.” Please check your home wordings or ask us if your company allows this alternative.

This winter, if you should be so lucky to be heading away to bask in the warm sun for a few days, make sure to have someone checking into your residence daily.  It will keep your coverage in full force, and could mitigate a bigger loss if your “home-checker” stumbles across something unplanned or unexpected.

 

This is a time to Remember.

Next Monday, the day will revolve around the 11th hour of the 11th day of the 11th month of the year.  I recently asked myself what the meaning around 11/11/11 is, so I took the time to look it up and get educated on the significance of the time chosen to remember.

The Armistice Agreement was signed on November 11, 1918 at the 11th hour of the day.  This agreement marked the beginning of the end of a long horrific war that cost many lives.  The agreement outlined some terms for the cessation of acts of war, and named Germany as the defeated enemy of war.  According to online sources, this is what was named in the agreement:

“The actual terms, largely written by the Allied Supreme Commander, Marshal Ferdinand Foch, included the cessation of hostilities, the withdrawal of German forces to behind the Rhine, Allied occupation of the Rhineland and bridgeheads further east, the preservation of infrastructure, the surrender of aircraft, warships, and military materiel, the release of Allied prisoners of war and interned civilians, and eventual reparations.”

This was a big step towards peace, freedom, and prosperity for the developing world.  The war formally ended on June 28, 1919 with treaties being signed in Versailles.  

At this point, you are likely wondering “Why is Block’s Agencies giving me a history lesson on an insurance agency blog?”

There are two reasons for the lesson- the first and foremost is to remember, and to never forget the fallen soldiers and their sacrifices they made and the important events in history that shaped what the world is today, and the second reason is that there is an applicable parallel to be drawn between the two events.

Utmost Good Faith

The Armistice Agreement and insurance both have a very similar foundation that they are built on.  That foundation is comprised of two components- contractual laws, and the trust it takes to see them through.  When the Armistice was signed, it was done so in good faith.  The paperwork was an expression of the intent of the leaders at the time to disarm, protect infrastructure and begin the release of prisoners of war, however the paperwork is just that – paper!  What followed was action and resolve to complete the work.  Nations ended hostilities, generals ordered the lowering of guns, and prison cells were opened.  This of course was all done because of the agreement, but one couldn’t happen without the other.  A parallel is drawn to insurance through the realization that when you sign an insurance application, it becomes a contract.  The only time you get to see the realization of that contract is when something goes wrong and you need to make that call to start the process of making things right.  This of course requires the second component to any agreement. Trust.

Trust

It’s the second component to the Armistice, and dare I say the more important component of the two.  Trust is what actually began the work of disarming nations, of opening cells, and repairing the damage of war.  To release prisoners, you need to trust that they will not turn on you the moment they are freed.  Again, similarly to insurance, you need to trust the company that underwrites your insurance to carry out the claims process as promised and to honour the contract that was set out in the wordings of your policy.  The insurance carrier is also trusting you, that in the event of a fire or theft that you are declaring actual goods that were lost. The good news is that trust comes easier with your insurance provider, as they are there to help, and are not there as your enemy.

This week we remember the fallen, and the price paid for our freedoms.  We are fortunate we can learn from our ancestors in a few different way: making peace is just a decision away, trust is a choice, and contracts require action. Let us never forget.