Time Element Property Insurance
What is time element property insurance?
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Ann Herro has been writing about insurance and employee benefits for over 15 years. She has covered topics as easy as insuring a car, and as difficult as transparency in healthcare costs.
Time element property insurance is coverage for a loss that results from the inability to put damaged property to its normal use. Its name refers to the “time element” because the amount of loss depends on how long it takes to repair or replace the damaged property.
Business interruption coverage and extra expense coverage are examples of time element property insurance.
Do you run a business that could be impacted by a temporary shutdown after a severe storm, a fire, or some other type of property loss? If so, time element property insurance is an important part of your overall business insurance package. A local independent insurance agent can help you learn more about it and get the coverage you need for your unique business.
What Does Time Element Property Insurance Cover?
Time element property insurance is typically related to business insurance. It covers things like business interruption, loss of income, extra expenses, service interruptions, soft costs, rental income, and more.
Time element property insurance reimburses the policyholder for monetary losses due to lost income or increased expenses related to a temporary property loss caused by a covered peril or another cause of loss defined in the policy (typically civil authority, ingress/egress, or service interruptions).
The amount of the loss and subsequent insurance coverage is directly correlated with the length of time that the property cannot be used — or the “time element” of the loss.
The two most common types of time element property insurance are business income coverage and extra expense coverage:
- Business income coverage. Business income coverage pays for your “lost” net income and normal operating expenses while your business is closed (or operating at reduced capacity) due to a covered property claim. Covered expenses might include utility bills, mortgage or rent payments, payroll, and more.
- Extra expense coverage. Extra expense coverage pays for costs you incur while getting your business back up and running. These expenses might include movers, additional or temporary staff, costs related to setting up a temporary location, and more.
You might need to look into some other types of time element coverage to see if they are necessary for your business. These include utility services time element insurance and contingent time element insurance.
- Utility services time element coverage. This insurance covers expenses you might incur if you are temporarily shut down due to a utility interruption (water, communications, power).
- Contingent time element coverage. This coverage extends your time element coverage to your critical suppliers. This means that if a supplier experiences a loss and you cannot get what you need to operate, your insurance would cover the related lost income or expenses.
What Is Not Covered by Time Element Property Insurance?
Time element property coverage is only applicable when there is actual physical damage to your property caused by a covered peril, and the damage prevents, suspends, or at least reduces the ability of the business to operate. The losses are only covered for the time required to repair or replace the damaged property and return to normal operations.
Stated more simply, time element property insurance will not cover losses unless:
- There is an actual loss of business income.
- There is a necessary suspension of operations.
- The suspension of operations is caused by direct physical loss or damage to property.
- The property damage is at the premises described in the policy.
- The property damage is caused by or results from a covered peril.
Sample Time Element Property Insurance Claims
How does time element property insurance work? Here are some real-world examples.
Retail
You own and operate a clothing store. A severe storm damages your roof and all of your inventory. You need to make roof repairs, clean and repair the store's interior, and reorder and wait for new stock to arrive.
While you make repairs, you move to a temporary location. Your expenses include restocking fees, moving and storage fees, rent, continued salaries, and other ongoing expenses.
Your time element property insurance will help you cover lost income as well as the ongoing and extra expenses you incur due to the covered property loss.
Manufacturing
Your manufacturing facility uses highly specialized machines to manufacture your product. A fire damages your building and its contents, including your essential machines and equipment. Ordering new machines is expensive and takes time, leaving you unable to operate even after repairs are made to your building.
You want to continue to pay valuable employees during the downtime, as well as all of your other ongoing expenses. Meanwhile, you’re unable to generate revenue while you wait for new equipment.
Your time element property insurance would pay your lost income, ongoing expenses, and payroll related to the covered property loss.
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What Does Time Element Property Insurance Cost?
Time element property insurance is not expensive relative to the overall costs for business insurance. The cost depends on the size and complexity of your business and the potential revenue and expenses that may have to be paid if you experience a covered loss that leads to a temporary stoppage.