Extra expense insurance is insurance that covers businesses for extra expenses they may incur in the event their businesses must temporarily shut down. Distinct from business interruption insurance, it covers expenses the former does not; however, these costs must qualify as necessary and reasonable. The coverage period lasts from the time the business had to stop operations until it can return to normal operations.
Following a disaster of some sort, such as a destructive fire or earthquake, a business may need to stop their operations for some time. While other forms of business insurance would cover certain expenses, such as property damage, lost revenue, and more, extra expense insurance would cover other necessary and reasonable costs. For example, a business might need to set up a temporary office and pay for utilities, phone connections, and Internet. Such expenses could qualify for coverage under extra expense insurance, but not under a business interruption policy. Nevertheless, the combination of both policies can potentially save business owners significant amounts of money if their business is ever interrupted.