Earnings vs Actual Loss Sustained

Many business owners don't understand business interruption let alone the differences between the various coverage available through insurance companies. In this post we are going to discuss briefly two of the basic coverage's available, Earnings and Actual Loss Sustained.

Earnings
Under this coverage payment is only made by the insurance company until the property is repaired or replaced. This means a business owner can be expected to absorb losses while their business gets back to regular operating capacity. The problem with this form of business interruption is the amount of time and coverage value can be limited depending on the amount of insurance purchase. Considering many businesses lose customer and supplier relationships during a large business interruption, it is critical the appropriate limits are purchased.  

Actual Loss Sustained
An Actual Loss Sustained form is designed to cover the actual losses encountered by a business owner during a business interruption. Not only does this form cover the loss of income while a business is being rebuilt or replaced, but it also covers actual income loss during the period covered under the policy limit. It can be hard for business owners to know exactly what the impact of a business interruption will be on their business.  The Actual Loss Sustained form, although more expensive, can take out a lot of the calculations  involved when insuring the appropriate limit.

The recommended coverage varies depending on business operation and varies from industry to industry. It is always recommended you consult with your insurance broker to determine what your business interruption needs are before you purchase coverage.

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