Extra Expense Insurance

What Does Extra Expense Insurance Mean?

Extra expense insurance provides coverage for businesses to offset additional costs incurred if they must temporarily shut down. Unlike business interruption insurance, it covers specific expenses not included in the latter. However, these expenses must be deemed both necessary and reasonable. The coverage period extends from the time the business ceases operations until it resumes normal functioning.

Insuranceopedia Explains Extra Expense Insurance

After a disaster like a destructive fire or earthquake, a business may need to temporarily halt operations. While other types of business insurance typically cover expenses such as property damage and lost revenue, extra expense insurance provides coverage for additional necessary and reasonable costs. For instance, a business might need to establish a temporary office and pay for utilities, phone connections, and internet services. These expenses could be covered under extra expense insurance, but may not qualify under a business interruption policy. However, combining both policies can significantly reduce financial losses for business owners during periods of disruption. Many small businesses get both forms of protection at once through a Business Owner’s Policy, which packages property damage and income loss coverages into a single plan. Owners shopping for coverage can also compare the different types of business insurance available to see how extra expense protection works alongside more standard policies like general liability and commercial property.