Blog Question – Loss of Rent for related company.

I received this question on Business Interruption insurance on the issue of loss of rent for a related company.

“Good afternoon Allan,

Please note that I have had an enquiry from one of our existing clients (doctors surgery/general practice) to review their Business Interruption insurance under their CGU Business Package (AIMS/Austbrokers agreed wording) and their accountant needs some further advice on how to best complete the BI Calculator form – brief details of the company structure are as follows;

  1. Super Fund – the building that the insured operates out of is owned by their superannuation fund and is to be insured under a stand-alone policy for replacement value along with cover for loss of rental income that is received from the ‘Family Trust’
  2. Medical Company – this company receives all income from practice and pays a service fee to the ‘Family Trust’. This also pays medical staff wages & superannuation.
  3. Family Trust – this company receives a service fee from the ‘Medical Company’. This service fee pays for non-medical staff wages, superannuation, medical supplies and property rental.

My question is, should the insured’s accountant complete the  LMI BICalculator.com based on combining the ‘Medical Company’ and ‘Family Trust’ or should they be completing separate forms for each entity?

If you could please clarify it would be appreciated.

Regards

Michael” [surname and email provided]

I replied as follows:

If the landlord entity only earns rental income I would leave rent as is (that is do not deduct it as an uninsured working expense) for the tenant and on Screen 6 of the Input Your Data screen there is a rent receivable question, third one down. Use that to record the gross rentals including outgoings paid by the tenant and then answer the following question about growth in rental income.

That way both entities will be fully covered.

Regards 

Allan

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