How Does Loss of Business Income Insurance Work for Assisted Living Facilities?

If your facility is damaged in a storm, fire, or other disaster, the property damage may be the least of your concerns. Your residents will need somewhere safe to stay, and if you can’t provide it, your revenue could take a major hit. Business income insurance for assisted living facilities provides coverage that helps assisted living facilities make up for lost income after a covered loss.

When Residents Are Displaced

In April, 36 residents were displaced after a fire damaged an assisted living facility in Hillsboro, Ohio, according to WLWT5. The fire started in a dumpster before spreading to the independent living facility. Some of these residents went to stay with family members, some were moved to another facility owned by the same company, and others had to be temporarily housed in other nearby facilities.

A similar incident occurred in January in Stevens Point, Wisconsin. According to WAOW, a fire damaged an assisted living facility and displaced 23 residents. No one was injured, but the fire caused smoke damage, and the ceiling had to be replaced.

What Would a Similar Disaster Mean for Your Facility?

A fire is a worst-case scenario for senior care facilities. It’s also a real possibility. As the two news stories described above show, fires and other disasters happen, and they can be devasting.

Consider how a fire or other similar disaster would impact your operations.

• Even with property insurance to cover the costs, repairs take time. Where will your residents stay during this period?
• If you cannot house some of your residents, how much revenue will you lose?
• If you have to relocate residents, how much will this cost?

Many residential care facilities are already operating on thin margins. If dozens of residents need to move out because of a fire or other disaster, the loss in revenue could be disastrous. Even worse, this loss will coincide with other expenses, such as the deductible on the property insurance policy.

Business Income Insurance Provides a Safety Net

Business income insurance, also called business interruption insurance, provides compensation for lost revenue that results from covered property damage.

Business income insurance is typically tied to the commercial property insurance policy, so it will cover the same events that the commercial property policy covers. Likewise, it will also exclude coverage caused by losses that the commercial property policy excludes.

When securing business income insurance, there are a few things to consider:

• How much coverage is available? You can use your current revenue to determine how much coverage you need.
• How long is the period of restoration? This is how long you can receive benefits while your property is being repaired.
• What perils are covered? Coverage is tied to your commercial property insurance, so check for common exclusions, such as flood and earthquake damage. Also, determine whether you have coverage for government-mandated evacuations.

Extra Expense Coverage Provides Additional Protection

In some cases, your facility may be able to find another home for displaced residents within your organization. This may be the best option, and it can keep you from losing revenue, but it will likely lead to additional costs. Extra expense insurance can cover these costs after covered property damage.

This could be a lifesaver after a disaster. Imagine that a fire has destroyed part of your facility and displaced 10 residents. You would like to continue housing these residents at another location, but doing so will cost extra money. Without coverage, you may be forced to turn the residents away. That doesn’t just mean losing out on revenue. It also means losing valued clients. Your facility’s reputation could also suffer as a result. With extra expense coverage, you’re in a better position to continue providing the same level of care for your residents as always.

Some business income insurance terms include extra expense coverage, while some do not include this. Review your policy to see if you have coverage.

Emergency Evacuation Expense Coverage

Emergency Evacuation Expense coverage is essential for businesses, as it reimburses costs incurred during evacuations due to catastrophic events like natural disasters or fires. This coverage typically includes transportation, lodging, and meals for evacuated individuals, up to a specified limit, such as $10,000 per evacuation and a group aggregate limit of $250,000. However, it does not cover salaries, overhead, or benefit expenses. The insuring agreement requires the insurer to reimburse the insured for evacuation expenses incurred during the policy period, provided the insured notifies the insurer within 30 days and supplies proof of payment. Failure to meet these requirements may jeopardize the claim.

Some Professional Liability/General Liability (PL/GL) policies, like those offered by PCH Mutual through Tangram’s PCALIC division, include Emergency Evacuation Expense coverage.  This coverage is crucial as it allows businesses to act swiftly in emergencies without financial strain, focusing on protecting lives and maintaining operational continuity. PCH Mutual provides up to $10,000 in reimbursement per catastrophic event for evacuation expenses

Is Your Residential Care Facility Prepared for a Disaster?

The EPA reports that wildfires are getting worse and AccuWeather says Tornado Alley is expanding. According to NOAA, the 2024 hurricane season is likely to be more active than normal.

Do you have the residential care home insurance you need to protect your facility against business income loss? Tangram provides insurance for residential care facilities through the Personal Care & Assisted Living Insurance Center (PCALIC). Learn more.