My Business Income Consultation from Chubb. Help Documents. User Guide. Frequently Asked Questions. Script

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1 My Business Income Consultation from Chubb Help Documents Select one of the links below for additonal information: User Guide Frequently Asked Questions Script

2 My Business Income Consultation from Chubb User Guide What is Business Income Insurance? It s your business. It s your livelihood. Consider for a moment a fire that destroys your business premises. Your property insurance would respond to the loss of your building or damage to your personal property, but what about your loss of profits and the expenses that you continue to incur even though the business is not functioning? How long will it take to return your business to the previous levels of success? How much and what kind of insurance do you need to respond to the consequential losses resulting from a covered loss to your property? That s where business income insurance comes into play. Business income insurance does for your business what it would have done had there been no loss to property. It insures your net profit (or loss) plus the necessary continuing expenses you would have incurred had there not been a covered loss to property. What is Extra Expense Insurance? Extra Expense insures those necessary expenses, over and above your normal operating expenses, you pay in an attempt to reduce the business income loss and/or return to business as quickly as possible. It is really the money you spend to fund your disaster recovery and business continuation plans. Additional (above normal) operating, rental, transportation, installation, employee, advertising and insurance costs are just some examples of extra expenses you might incur during the time your business is struggling to stay in the marketplace after a loss. Why do I need Business Income/Extra Expense Consultation? Determining the amount of business income and extra expense insurance you need may be challenging. It requires careful analysis and calculation of your business needs. My Business Income Consultation from Chubb provides the important information to consider. We have simplified it so you can have a meaningful conversation with your insurance agent about your needs. Locate My Business Income Insurance 1. Open your Internet browser. 2. Type Chubb.com displays.

3 Business Income Consultation System Navigation Navigating is easy. The chart below provides all the available navigation. Step 1 Business Income 1. Click the first box if your business is in manufacturing, wholesaling or retailing. Companies choosing this option would include: manufacturer of component parts, subsystems or original equipment wholesaler of plumbing supplies or meat retailer of groceries or shoes Click here to proceed to the Manufacturer, Wholesaler or Retailer page. 2. Click the second box if your business provides services. Companies choosing this option would include those that: consult on and develop custom software provide services such as: education healthcare hospitality internet laundry printing telephone Click here to proceed to the Service Provider page. 2

4 Step 1 Business Income Manufacturer, Wholesaler or Retailer As a Manufacturer, Wholesaler or Retailer, you must complete questions A, B and C. 1. Type the amount of your gross revenue from operations in the field provided. Gross revenue from operations is gross sales including third party rental revenue, all other income (e.g., licensing fees, royalties) minus: returns and allowances, discounts granted to customers, and prepaid outgoing freight. Note: It is helpful to delete the number (zero) in each field before typing. This is to avoid having an extra zero in the number you enter. Then, you may type your number using commas, but the commas will not be reflected in the worksheet field. The maximum number of characters in each field should not exceed Type the income from research and development. Research and Development income can be grants, endowments and other financial contributions, as well as agreements with third parties pursuant to a written contract. 3. Type the cost of your materials in the field provided. Include only the cost of materials you buy. For manufacturers, it is the cost of raw stock. For retailers and wholesalers, it is the cost of merchandise you plan to sell. Include the cost of transportation to bring the goods or materials to you. 4. Determine if you want to exclude or limit your ordinary payroll. It is recommended that you do not exclude ordinary payroll and just click to include 100% of your payroll. For additional help or guidance, refer to the help provided within the tool. 3

5 Step 1 Business Income Service Providers As a Service Provider, you must complete both questions A and B. 1. Type the amount of your gross revenue from operation in the field provided. Gross revenue from operations is gross sales including third party rental revenue, all other income (e.g., licensing fees, royalties, etc.) minus: returns and allowances, discounts granted to customers, and prepaid outgoing freight. Note: It is helpful to delete the number (zero) in each field before typing. This is to avoid having an extra zero in the number you enter. Then, you may type your number using commas, but the commas will not be reflected in the worksheet field. 2. Type in non-continuing service costs. Non-continuing service costs means money/costs you have to pay to have something done for you that will not continue during the business outage (period of restoration). For example, programming services not under contract, or painting services paid for on a batch or piece basis. 3. Determine if you want to exclude or limit your ordinary payroll. It is recommended that you do not exclude ordinary payroll and just click to include 100% of your payroll. For additional help or guidance, refer to the help provided within the tool. 4

6 Step 2 Your Duration of Loss Components of Loss Nobody knows ahead of time what the duration of a loss might be. Therefore, in order to establish a limit of insurance for business income, it is useful to start with the absolute worst-case scenario: the total destruction of your business and restoration under the most adverse conditions. Your business recovery plan must address the five components of loss in order for you to restore your operations to where they would have been had there been no loss. You should assume you can conduct no business during the period of this exercise. The time it will take you to move through the Five Components of Loss has a monetary value associated with it. The longer it takes, the more money is lost. In a worst-case scenario, it may take more than 12 months to fully recover. Complete the page: 1. In the field provided, type the number of months you estimate are required to return to your previous level of business. The dollar amount that represents the number of months you estimated for your loss displays. Changing the number of months changes the value amount of your duration of loss. 5

7 Step 3 Extra Expense Extra expense insures those necessary expenses, over and above your normal operating expenses, you pay in an attempt to reduce the business income loss and/or return to business as quickly as possible. It is really the money you spend to fund your disaster recovery and business continuation plans. In the previous step, you assumed you could conduct no business while you were restoring your business. While it was necessary for you to think that way for that exercise, it is not the way you will want to act in the event of a loss. You will try to do everything you can to stay in business and also to shorten the time your business is down or running at a reduced level. In this step, we are asking you to determine how many dollars above normal you expect to spend to stay in business during the restoration period and/or actually shorten the duration of loss. In addition, we are asking you to estimate the number of months you will need to spend extra expense dollars. Complete the fields: 1. The first and last months extra expenses are usually greater than the intervening months, which is why they are separated. Moving and hauling, installations, finding new quarters or rehiring employees usually occur during the first and last months of the loss and incur the greatest expense. The remaining fields represent the most common extra expenses that, if paid, might shorten the duration of loss and allow you to stay in the marketplace. Complete each applicable field with a reasonable monthly extra expense amount. If you don t have any extra expense for a field, skip it. If you have other extra expenses not listed, total the monthly amounts and type it in the Other Extra Expense field. 2. Enter the number of intervening months you anticipate needing to spend the extra expense dollars. Your Total Expense Amount changes based on the number of months you enter. 6

8 Step 4 Final Analysis When this page displays, it is completed with the numbers you input (as shown in the example above). 1. Type the percent you estimate would be saved if the Extra Expense Amount was paid. Example: In Step 2, Duration of Loss, you may have estimated you would be out of business 12 months because it would take you 4 months after property was restored to regain your customer base. In Step 3, Extra Expense, you may have estimated that by relocating, leasing some key equipment and through extraordinary communications efforts, you would not lose key customers, so the duration of loss could be reduced by four months. That would be a reduction in the duration of loss of 33%. Be careful here. A 33% reduction of duration of loss may not be a straight 33% reduction of business income. Often the largest portion of a business income loss occurs in the first couple of months, which could skew the estimate. The Final Business Income & Extra Expense Amount changes based on the percentage entered. 7

9 Completion Click to review your worksheets. Now that you have your estimated Final Business Income and Extra Expense Amount that you need to insure, contact your Chubb agent or broker to obtain the necessary insurance. Note: You may also customize the pdf document to add your name and address information. Adobe Reader 8.x is required to save or final document. Sharing Options After Adobe opens, you may also your complete My Business Income Consultation to your agent or underwriter. To do so, click the appropriate icon on your Adobe toolbar: Click to print. Click to save to your local drive. Click to ; choose send copy. 8

10 Frequently Asked Questions How To Use The Tool Click on the question that you would like to have answered. What accounting method is used to calculate a business income loss? What do I do if I have a loss? What documents do I need to produce for the claims adjuster? How should I use this worksheet if my business has more than one profit center (or location)? My business is custom software development. Which worksheet option should I use and how does this worksheet work for me? What is the meaning of non-continuing service costs? What if I operate an ebusiness? Are there special issues/coverage? What are a Disaster Recovery and/or a Business Continuity Plans? Do I need one? How do I determine extra expense limits before I have a loss? When is it best to exclude or limit ordinary payroll? If I want to exclude or limit ordinary payroll, can I include some employees in executive payroll even though they would normally be classified as ordinary payroll? Frequently Asked Questions General Business Income Since I do not derive any profit from my research and development operations, how would business income be handled? What is the difference between a deductible and a waiting period? Click on the question that you would like to have answered. What does it mean if I insure my business income at 50% coinsurance? What is contingent business income exposure? What about a business income loss because of a loss at a utility supply company? 9

11 What accounting method is used to calculate a business income loss? The accrual accounting method is necessary. In the event of a covered cause of loss, your insurance company must learn about the experience of your business prior to the loss. This can not be properly obtained if business income is calculated using the cash accounting method. The cash accounting method shows all receipts and disbursements and is unacceptable for business income. It may eliminate certain items earned or incurred in the current fiscal period or may include certain items which may apply to a previous accounting period. What do I do if I have a loss? What documents do I need to produce for the claims adjuster? Like any other loss, a Business Income/Extra Expense loss needs to be quantified. In most situations, the services of a forensic accountant are engaged. They help you gather the documentation that is needed to justify the loss and expenses. You need to produce current and past financial statements (up to 18 months prior to loss) and forecasted 12 months budgets. This information helps the claims adjuster develop time lines at the time of loss. Was the business growing at time of loss? How can you prove that sales were escalating? These are some of the questions for which you will be asked to provide information. How should I use this worksheet if my business has more than one profit center (or location)? First, identify whether there are any interdependencies between any of your profit centers or locations. You have interdependent locations if two or more locations depend on each other to produce a single product. You have independent locations if none of them depend upon any other to produce a single product. You should use this worksheet to compute the business income and extra expense requirements for each independent profit center or location and for each cluster of interdependent locations or profit centers. The sum of such calculations would be equal to the business income and extra expense needs of the organization if all income generating locations were lost in a single disaster. You may want to buy business income and extra expense limits for each such location (specific insurance), or you may want to buy a single business income and extra expense limit that applies across all locations (blanket insurance). Your blanket limit of insurance should represent your worst-case scenario, meaning, the limit should reflect the largest combined loss of business income and extra expense you can envision. If your worst-case scenario includes the possibility of loss of all of your income producing locations, the blanket limit should reflect the sum of the BI and EE limits calculated for each. Your agent will want to see whatever calculations led to your final choice of a combined business income and extra expense limit. 10

12 My business is custom software development. Which worksheet option should I use and how does this worksheet work for me? Use the service option on the worksheet for purposes of insurance. Your annual sales minus any non-continuing service costs are the best representation of your potential 12-month business income loss. This worksheet asks that you start with 12-month business income duration of loss. There may be many reasons why the duration of loss could be much less. Ex: You may have more than one independent profit center, each of which contributes to total sales. (See multiple profit center organizations.) Or, you may have redundancy in your operation, or both. In the service option on the worksheet, you have the opportunity to develop a business income and extra expense limit taking into account a very speedy recovery (short duration of loss) due to the nature of your operations. What is the meaning of non-continuing service costs? It means money/costs you have to pay to have something done that will not continue during the business outage (period of restoration). For example, programming services not under contract, or painting services paid for on a batch or piece basis. If these services were under a contract that obligated you to continue to pay on a monthly basis, they would be included under continuing expenses in the BI loss settlement. If there is no such contract, nor any obligation to pay when the business is interrupted, the costs will not continue during the period of restoration, and so, the costs can be deducted from gross sales for the purposes of determining the 12-month business income amount. What if I operate an ebusiness? Are there special issues/coverage? Like any other business, you provide a product or service. Due to the use of ISPs, contractors or vendor services, your exposures for business income and extra expense may become more contingent than direct. The ISP s exposure to risk can also be yours. If you feel that you need to carry limits of insurance reflective of their downtime exposure, the amounts can be determined by having the ISP, vendors and/or contractors go through the My Business Income Consultation from Chubb. Please discuss these amounts with your agent and insurance provider. 11

13 What are Disaster Recovery and/or Business Continuity Plans? Do I need one? 9/11, Hurricane Katrina, the Southern California Firestorms. Never has there been a more important time to consider what it would take to reconstitute and operate your business in the event of a local or regional disaster. A Disaster Recovery and Business Continuity plan is your road map to recovery from a major or total loss. It outlines on what and how much you spend extra expense dollars to keep your business running and protect your market share. Does your company have a Disaster Recovery and/or Business Continuity plan in place? Is it updated and tested regularly? What is the cost to implement such a process/plan? There are companies that specialize in this field and can help develop a plan. There are also self-helps in the form of worksheets and interactive CDs that assist you in considering everything necessary. At the end of My Business Income Consultation from Chubb, you will have the opportunity to order a copy of Chubb s Business Recovery Plan CD. There could be sizable insurance savings by having a plan. Please, contact your agent to help you get started. How do I determine extra expense limits before I have a loss? This is one of the most difficult amounts to determine. While business interruption values are determined using your financial statements, extra expense amounts are determined by your monthly budgets. Extra expense amounts are those expenses over and above your normal operating expenses. Here are some considerations for extra expense: Cost to operate from another location while your primary location is being rebuilt or repaired. Cost to rent additional space. Cost of additional wages to entice your employees to work from the new location. Cost of employees working from home. Cost of using subcontractors to produce your goods and services while you recover. Keep in mind, that while using extra expense dollars you are also staying in business and protecting your market share. If your company has a Business Continuity plan, extra expense dollars are used to fund this plan. 12

14 When is it best to exclude or limit ordinary payroll? Limiting ordinary payroll can be considered if you anticipate a long duration of loss, your labor force can be acquired or reacquired and quickly oriented to perform at an acceptable level. Because of these uncertainties, Chubb recommends including your ordinary payroll. If you insure your entire payroll or limit it to 30, 60, 90 or 180 days, the option still exists if circumstances dictate, to lay off workers and use the money to pay a business income loss for a longer than expected duration. If I want to exclude or limit ordinary payroll, can I include some employees in executive payroll even though they would normally be classified as ordinary payroll? Yes, but you should let your agent and underwriter know who the people are or what the positions are so the policy can reflect the intent. General Business Income Since I do not derive any profit from my research and development operations, how would business income be handled? Business income losses consist of lost net profits and continuing expenses. Business Income with Extra Expense and Research and Development Income is an insurance form for companies that are solely Research and Development organizations or organizations that have a separate, identifiable, Research and Development operation. For organizations with separate identifiable R&D operations the insurance separates manufacturing operations from R&D operations and in the event of a loss, adjusts each separately subject to the combined limits of insurance. First, the form divides the definition of Business Income into two sections, one for R&D and the other for manufacturing. The definition that applies to manufacturing operations says that if the manufacturing operations are operating at a loss, the amount of the loss will be deducted from continuing expenses that are incurred during the time the business is recovering. The Business income definition for R&D operations takes into account that no profits are expected from R&D operations, so continuing expenses from interrupted R&D operations are paid without regard to whether the manufacturing operations are operating at a profit or a loss. 13

15 What is the difference between a deductible and a waiting period? A deductible is a dollar amount that is subtracted from the amount of an adjusted loss. Ex: A fire causes damage to a building. As a result an insured suffers a $1,000,000 loss of business income. The insurance company agrees to pay $1,000,000 under their policy less a $10,000 deductible. The insured receives a payment of $990,000. A waiting period is an amount of time represented by normal business hours, which must elapse before the insurance company starts calculating a business income loss. Ex: If the waiting period is 24 hours, the company will not consider any business income loss that was incurred in the first 24 normal business hours after the loss. What does it mean if I insure my business income at 50% coinsurance? Coinsurance is a penalty clause insurance companies use to hedge against under valuation. The coinsurance formula says the company will not pay more of any loss than the amount of insurance purchased bears to the amount of insurance that should have been purchased. Did/Should X the loss = coinsurance loss payment. When an insured purchases a limit and a 50% coinsurance clause, they are telling the underwriter that the limit of liability at the time of loss will be at least 50% of a 12 month business income amount. If it is not, there will be a penalty. Ex: An insured purchased a limit of $1,000,000 with 50% coinsurance. Subsequently, there was a loss and the insured claimed $1,000,000. At the time of loss, it was determined that the insured s actual 12 month business income amount was $3,000, % would have been $1,500,000. The actual loss payment would be determined by the formula did $1,000,000 over should $1,500,000 times the loss: =.667 X $1,000,000 = loss payment of $667,000. Since the baseline starting point for business income pricing is the 12 month business income amount, the underwriter obtains a surcharge in the rate that is applied to the lower limit purchased. 14

16 What is contingent business income exposure? No company operates in isolation. It has suppliers and customers. Damage to either can have devastating effects on your business. Contingent business income insurance indemnifies you for upstream (supply) and downstream (customer) loss that affects the company s profitability. Ex: You make pens. Several vendors provide integral parts such as ink, clips etc. Your supplier is knocked out of operation due to a covered peril and you may not be able to complete the assembly of your pens and get them to market. Unless you have an alternate supplier that can meet your supply schedule immediately, you will probably suffer a contingent business income loss because of this. Some companies give an automatic limit for contingent business income, but, automatic limits may not be enough. If you have critical customers and suppliers, or you depend on contract manufacturers or leader type properties it would be a good idea to evaluate your contingent business interruption limits needs the same way you have developed your limits for business income insurance for your own premises. What about business income loss because of a loss at a utility supply company? Coverage for off-premises services is available in very small automatic limits or for larger limits for an additional premium charge. Loss of utilities provides business income insurance for covered losses that result in interruption of water, communication and power supply services. Insurance for overhead transmissions lines in connection with communication and power supply services are available as an option. 15

17 Script Click the Steps (left column) or Help text (right column) to review the script for each step. Steps Pages Help Text Welcome Step 1-Manufacturer, Wholesaler or Retailer Step 1-Service Provider Step 1-Ordinary Payroll Gross Revenue from Operations Research and Development Costs Cost of Materials Ordinary Payroll Step 2 rebuilding property Building Permit Ordinances Additional Construction Time Replacing, Repairing and Restoration of operations Normal Sales Step 3 Step 4 Extra Rent Extra Insurance Extra Employee Expenses Extra Advertising Expenses Extra Operating Expenses Other Extra Expenses 16

18 Welcome Script Welcome to My Business Income Consultation from Chubb. This is a quick and simple way to determine how much business income insurance you need. And having the right amount of insurance is critical to make sure your business can survive an emergency, the loss of operations, and the loss of income. This tool will simplify everything. I ll walk you through the four easy steps. It will take only ten minutes or so. Two important rules: First, answer all the questions carefully. And second, if you re unsure about anything, use the help tools. For help with the system, use the User Guide over here. If you need help on any step and you see this question mark (?) highlighted, click on it and I ll help you out. And for a refresher course in business income and extra expense insurance, click here. When you re ready to get started with Step One, click Start. 17

19 Step 1 Script Business Income Manufacturer, Wholesaler or Retailer In Step 1, you ll determine your 12-month business income amount. That s the amount you need to achieve your normal net profit, and to pay continuing expenses, including ordinary and executive payroll, for a full year. First, note whether you are a manufacturer, wholesaler, retailer OR a service provider. Good. As a manufacturer, wholesaler or retailer, you need to complete sections A, B and C. Here, you need to decide if you want to include Ordinary payroll in your 12-month business income amount, or not. It is advisable to include ordinary payroll for the full duration of a loss. If you want to include ordinary payroll, click NEXT to go to step 2. If you do not want to include ordinary payroll, click here. (Step 2) Step 1 Ok. As a service provider, you need to complete sections A and B. Script Business Income Here, you need to decide if you want to include Ordinary payroll in your Service Provider 12-month business income amount, or not. It is advisable to include ordinary payroll for the full duration of a loss. If you want to include ordinary payroll, click NEXT to go to step 2. If you do not want to include ordinary payroll, click here. (Step 2) Step 1 Script Ordinary Payroll It is advisable to include ordinary payroll for the full duration of a loss. In many cases, a changing labor market makes it difficult to replace employees once they have left. Insuring your payroll can help you retain talent but it also gives you flexibility to do other things. You can still choose to reduce your payroll, or not pay it at all at the time of the loss. You can then apply those dollars to your income loss, to other continuing expenses, or to extra expenses if you wish. It s your option. If you don t want to include ordinary payroll, or you want to limit the amount, here are your options. Enter your full annual payroll amount where indicated. The tool will automatically calculate business income amounts for zero, 12, 6, 3, 2 or 1 month s worth of ordinary payroll. Choose the amount you want to include. 18

20 Step 2 Script In Step 2, you will estimate the duration of loss you would like to cover. That is the total number of months from the date of your loss, until your operations and sales are back to where they would have been had there been no loss. To think through what it would take to restore operations, use the Five Components of Loss chart. When entering a number here, note that even a small loss to your property could put you out of business for a long time especially if your building or equipment is highly customized. It s often best to consider the worst possible loss that could occur to your property, and the worst possible conditions for restoring it. Also, assume you are able to do no business while your property is being restored. The process to get a building permit and designing a building that meets the latest regulations also takes time. A visit to city hall and a contractor will help you better understand what is required. If you have not already done this research, you may want to save what you have done and come back when you have more specific information on your building requirements and codes. 19

21 Step 3 Script Now we ll figure out your extra expense costs. Up to this point, you ve been doing your calculations in a vacuum, assuming the worst-case scenario operations are stopped for the duration of the loss. Now contemplate how you can stay in marketplace and shorten the time it will take your business to fully recover. These are the costs you will incur when restoring operations after a loss. These are over and above your normal business operating costs. The examples shown here are the most common. Note the expenses that would apply in your case, and enter a reasonable amount for that expense. If your business would face some costs not shown here, enter an amount for them in the space marked Other. Here s a tip: Spending money on some of these items may actually reduce the duration of the loss helping you achieve your ultimate goal of getting back into business as quickly as possible. Think about how spending this money would effect your duration of loss and enter the new duration of loss number in the space provided. 20

22 Step 4 Script You re almost done. The final step is to consider this question. If you spend the extra expense dollars you noted in Step 3, would it speed up the recovery of your business? And if so, how much would it shorten your recovery time? And how much might that reduce your business income needs? For example: Let s say you figured it would take 14 months to restore operations without spending the extra expense dollars. But if you did spend the extra expense dollars, it would take only 9 months. You would save 5 months out of 14 or 35%. That would reduce your business income needs by 35%. Figure the percentage that is best for your situation. Take into account that it may not be a straight calculation, as the bulk of business income costs occur in the first month following a loss. Enter that number. Then, to see your Business Income and Extra Expense insurance estimate, click here. If you wish, you can print this document, or save it as a PDF file to your personal computer. You can then send the file as an attachment to your insurance agent or broker. Thanks for using My Business Income Consultation from Chubb. You can use this tool any time to revise your estimates. In fact, we suggest you re-estimate every year to make sure you are adequately covered as your business grows. Now that you know the limits you need, contact your local Chubb agent to find out how you can get yourself adequately protected. 21

23 Definitions Additional construction time for a better building Extra Time You may already know how long it will take to replace your building as it currently exists, but to comply with changing laws and ordinances, it may take a lot longer. Consider these time lags carefully. Consult with local authorities and contractors it s an investment in time that could really pay off later. Extra Advertising Expenses After a loss, you may need additional advertising to inform customers of changes, or to offset negative publicity. Additional costs maybe incurred as you gear back up once your operations are restored. Cost of Materials Include only the cost of materials you buy. For manufacturers, that s the cost of raw stock. For retailers and wholesalers, it is the cost of merchandise you plan to sell. Don t forget to include the costs of transporting the materials to you Extra Employee Expenses At face value, employee expenses include benefits, social security payments, and union dues you pay, plus your Workers Compensation premium for ordinary payroll. Also consider transportation costs and travel expenses, overtime, shift differentials, additional staff and other incentives. Gross Revenue from Operations Think about grants, endowments and other financial contributions made to you through written agreements with third parties, to further your research and development operations. Extra Insurance If you temporarily have to move to another location, you may have to pay more for your insurance than you ve been paying. Factor in this difference. Other Extra Expenses Your company may have unique expenses that have not been identified above. These should be listed here. Extra Operating Expenses What would it cost you to stay in business after a loss? Consider all the possible costs. You may need to hire engineering and administrative staff, spend money on emergency facilities, or transport supplies and materials. You may also have additional expenses for services, property and equipment used while at your temporary location. Ordinances There may be town or state ordinances that could affect the refurbishing of the building. For example, a partially damaged building may need to be demolished and replaced with a building of superior construction. Your may need to retrofit the building with a sprinkler system, or modify it to meet ADA (Americans with Disabilities Act) requirements.or you may need to replace aluminum wiring with copper wire. This will all require more of your time and money 22

24 Definitions Ordinary Payroll Ordinary payroll consists of salaries, benefits, social security and governmental pension payments, union dues, and worker's compensation premiums for all employees except those on executive payroll. Executive payroll is payroll for: Officers, Executives, Department Managers, employees under contract, and other employees you specify. Normal Sales Once your operations are restored to their pre-loss condition, how long will it take to restore your sales to where they would have been? The longer you are out of business, the longer it will take get back to previous levels.this delay can have a long-term impact on your firm s reputation and market position. If your business has seasonal patterns, take that into consideration. For example, if you receive most of your income during holiday season, a loss at that time will essentially ruin a year s business. You should select 12 months as your duration of loss. Extra Rent Rent includes any property other than buildings you rent until you restore your business to normal. Include any fixtures, machinery and equipment that you do not intend to replace with your property insurance money at your temporary location. Replacing, Repairing and Rebuilding Property Buildings take time to replace. It may take even longer to replace custom-made machinery. Consult with your manufacturers about likely replacement times. Also consider the financial effect of lost or damage equipment, paperwork, and media. Research and Development Income Think about grants, endowments and other financial contributions made to you through written agreements with third parties, to further your research and development operations. Restoration of Operations Once your building and personal property have been restored, how long will it take you to return to the same level of production that would have existed if no loss had occurred? With some operations, that time frame is short; however, other operations may take weeks or even months. Securing a Building Permit To secure a building permit you will need to submit architectural plans, get approval from the planning board, and make any adjustments the town requires. This takes several months. A building permit will not be granted until all ordinance and local requirements have been met. 23

25 Chubb refers to the insurers of the Chubb Group of Insurance Companies underwriting coverage. Not all insurers do business in all jurisdictions. Box 1615 Warren, New Jersey This information is advisory in nature. It is offered as a resource to help you establish adequate business income and extra expense values for insurance purposes. This guide is necessarily general in content and is intended as a tool that you can use together with others at your disposal to establish the values you wish to insure. Because the steps outlined in this resource rely on information provided by the insurance purchaser, no representation is made with respect to the accuracy, adequacy or suitability of the values established. No liability is assumed by reason of this information, the values determined using it or the insurance buying decisions made as a result. In determining the values you wish to insure, you should consult with your insurance representatives.