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What is Extra Expense Insurance?

What is extra expense insurance?

Extra Expense Insurance is a type of commercial coverage that will pay for the additional costs of the insured while they recover from a significant disruption. It can cover any non-ordinary expenses that a business may incur and provide you with money to help your business stay operational while your property is either replaced or repaired.

What is the difference between business interruption insurance and extra expense coverage?

Business interruption insurance will provide coverage for normal business expenses in the event a company needed to close operations temporarily. This includes items such as loans, wages, and leased business property. Buying extra expense insurance will pay for expenses that are considered to be ‘above and beyond,’ any normal operational costs.

When is extra expense insurance activated?

Extra expense insurance will activate following an event that is covered under a business property insurance policy. It starts on the day you suffer the event that causes the damage to your property.

Who should buy extra expense insurance?

If you are thinking about whether or not you should buy extra expense coverage for your business, there are a few key points to consider.

  1. If your main business premises were out of action, could you easily relocate to a temporary location and resume your business operations?
  2. Do you provide a service or product this is time-essential? For instance, if your business was to be out of action for anything more than a week, could you lose your customers to the competition?
  3. Do you offer services that are essential for the community, such as nursing homes, schools, medical centers etc.
  4. Do you provide services that your customers depend on 7 days a week?
  5. If you needed to relocate premises temporarily, could you easily access any equipment from this location?

Essentially, if the services your business provides could be easily picked-up and resumed from a temporary location, this makes the concept of buying extra expense insurance a viable choice for your business.

What exactly does extra expense insurance cover?

Buying extra expense insurance will cover any expenses that are over and above any usual operational expenditure for your business. In order for the policy to become active, the expenses you incur must arise following physical damage to your property after a named peril on your commercial property insurance policy.

The expenses that are covered must be during a period of restoration, and which would not have arisen should the physical damage not have taken place, and for these below-mentioned reasons.

  1. In order to reduce the impact of a shutdown if you are unable to operate
  2. To avoid/mitigate the closure of your business and to allow you to carry on operating
  3. To replace/repair any damaged property, but only if these costs decrease the overall amount of losses that will be payable

What is the period of restoration in excess expense insurance?

When you buy extra expense coverage, you will see the term ‘period of restoration’ mentioned. This term refers to the time it takes to replace or repair your damaged property. It starts on the date of your physical loss, and it ends when your damaged property is either rebuilt, replaced, or repaired. If you need to move to another location, then the period of restoration will end when you begin operating from the new premises.

How to buy extra expense insurance?

There are lots of ways you can buy extra expense coverage:

  1. It can be purchased as part of a BOP
  2. You can buy extra expense coverage as an individual policy
  3. It can form part of a package with business interruption insurance
  4. You can buy extra expense coverage as a rider to a business property insurance policy

If you are looking to get quotes for extra expense insurance, then you should speak with a local commercial insurance expert in the first instance. They can offer advice on the most cost-effective solutions for all your commercial insurance needs, and help to answer any questions you might have.

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