(June 2019)
A deductible is usually defined as a fixed dollar amount that is the named insured’s share of a covered loss. However, that definition does not apply to time element coverage. Instead, its deductible is expressed as a period of time. It is a certain period of uncompensated time that must pass before loss payments begin. It is a deductible that is hidden in a definition.
Both CP 00 30–Business Income Coverage Form (and Extra Expense) and CP 00 32–Business Income Coverage Form (without Extra Expense) have a 72-hour waiting period for business income losses. CP 00 50–Extra Expense Coverage Form and CP 00 60–Leasehold Interest Coverage Form are not subject to a waiting period. The extra expense coverage in CP 00 30 and CP 00 32 is also not subject to a waiting period.
The waiting period is part of the definition of Period of Restoration. It states that the period of restoration is the time period that begins 72 hours after a direct physical loss for business income due to a covered cause of loss to covered property that occurs at the described premises. The waiting period also applies to business income losses that involve acts of civil authorities. This means that 72 hours (three days) must pass before coverage begins.
There is one endorsement that offers two options to the insured that cannot afford to wait 72 hours or that simply wants coverage to begin sooner. CP 15 56–Business Income Changes–Beginning of the Period of Restoration allows the insured to totally eliminate the waiting period or to reduce it to only 24 hours. It does so by revising the definition of the Period of Restoration to begin when the direct damage occurs or 24 hours, whichever option is selected. The waiting period for civil authority is changed in the same way.
The business income rate is surcharged 5% to reduce the waiting period from 72 hours to 24 hours or 11% to completely eliminate the 72-hour waiting period.