Insurance Glossary | Insurance Terms beginning with 'E'

This form of insurance provides loss of income coverage (i.e., "disability income") for your business by replacing your operating income during the period when damage to the premises or other property prevents income from being earned.

It is by means of your operating income that your business meets its expenses of payroll, light, heat, advertising, telephone service, etc., and from which your profit is derived. If you suffer a business interruption and have to close for several months or operate at a reduced pace because of fire or other perils covered by your Earnings insurance, this income will cease or be reduced.

For the purpose of this insurance coverage, "earnings" are defined as the actual loss sustained by the insured as a direct result of business interruption necessitated by damage or destruction of real or personal property. The damage or loss must be caused by the insured perils.

Furthermore, "business income" is defined as the sum of total net profit, payroll expense, taxes, interest, rents, and all other operating expenses earned by the business.

The amount of coverage your Earnings insurance provides is established on the basis of either amount of insurance or actual loss sustained for each 30-day period of necessary business interruption caused by damage or loss from covered perils. There are several ways to set up Business Interruption depending upon your particular business. Monthly limitations, coinsurance, maximum time period to be paid, etc.

In addition to Earnings insurance, it is also advisable to carry Extra Expense insurance (see separate coverage explanation).

A Standard property insurance policy leaves something to be desired in addressing special EDP-related exposures. Electronic data processing equipment and its software is particularly susceptible to damage from electrical or magnetic disturbance and changes in temperature or humidity -- perils which are excluded in a standard "special" perils property policy. Except for prepackaged software programs, which are typically covered on an actual cash value basis, coverage for programs and data in a standard property policy is essentially limited to replacement with blank tapes or diskettes plus transcribing expense. Finally business interruption coverage in connection with damaged EDP Media {not equipment} is limited to 60 days from the date of loss or the time when the other damaged property is repaired, whichever is longer. Therefore, if the building repairs are complete, but normal operations cannot resume because replacement computer programs, data or media are not readily available, an uninsured business interruption loss may result.

The best way to resolve these coverage inadequacies for EDP exposures is to buy a special EDP policy. Typically, EDP policies provide "special" peril coverage similar to that provided by "special" property forms, PLUS coverage for all electrical and magnetic damage, mechanical breakdown and often temperature and humidity changes as well. Some insurers include these perils in the basic form, while others make them available by endorsement for an additional premium. Usually these broader coverages are subject to a higher deductible as well. Valuation can be on either a replacement cost or actual cash value basis, and coverage may be available on a blanket as well as a scheduled basis. Media coverage includes the cost to reconstruct software developed in-house {subject to the limit of liability selected for the coverage}, if necessary.

Perhaps most importantly, an EDP policy will respond appropriately to extra expense or income loss from the loss of EDP equipment, programs and data, provided that these coverage options in the policy have been elected and adequate limits of liability have been established.

Protects the insured employer against claims by employees or former employees resulting from negligent acts or omissions in the administration of the insured's employee benefits programs.

The term "employee benefits programs" is defined to include group life insurance and group accident and/or health insurance; profit sharing plans; employee stock subscription plans; and workers' compensation, unemployment insurance, social security benefits, disability benefits, etc.

Coverage is intended to extend to the "administration" of these plans, including counseling employees, interpreting employee benefits programs, handling records, enrolling/terminating/cancelling employees in specified plans on a timely basis, etc.

Employee dishonesty coverage protects an employer from financial loss due to the fraudulent activities of one or more employees. The coverage includes protection for loss of money, securities, and other property of the insured.

Some scheduled policies are still available, but the majority are written on a blanket basis. This provides coverage for all employees, subject to the policy definitions.

The limit of liability is "per loss" and is applied on an "occurrence" basis. All acts involving the same employee or group of employees is considered one occurrence.

Protects the corporation, directors & officers and employees for claims resulting from wrongful termination, discrimination, sexual harassment, wrongful discipline and failure to employ or promote.

Whether you are right or wrong in the eyes of the jury, the typical defense costs alone average $100,000 - $200,000 per case!

Coverage for liability resulting from errors or omissions in the performance of professional duties. Applicable as a general rule to professional business activities such as banking, accounting, law, insurance and real estate.

If your building was rendered untenantable by fire or any other insured peril, it would probably be necessary to secure other quarters to continue your business operations. However, the use of such buildings would undoubtedly involve many extra expenses, such as rent, installation of telephones, etc. Extra Expense insurance covers such expenditures over and above your normal monthly expenses.

If your computer/EDP equipment was damaged or destroyed by fire or any other insured peril, it would probably be necessary to incur certain extra expenses to continue your business operations. While your equipment is being repaired or replaced, you might have to rent temporary equipment, hire additional personnel, pay overtime wages, and rent additional space.

Likewise, you might have to "recapture" and "re-enter" lost information after your equipment is repaired or replaced. This would be in addition to your normal, ongoing day-to-day operations.

Extra Expense insurance for computers covers these and similar expenses resulting from a covered loss.

Any statement or proof of a person's physical condition, occupation, etc., affecting acceptance of the applicant for insurance.

The termination of a term life insurance policy at the end of its period of coverage.