Business Income And Extra Expense Insurance
Business Income and extra expense insurance is protection against loss of income or profits when a business has incurred a physical loss or damage to their building, equipment or stock (finished or unfinished). The loss must have occurred as a result of a covered peril such as but not limited to fire, theft, windstorm, or vandalism.
The coverage will help a business resume or stay in operation while repairs of the physical damage are being made. The insurance will cover any fixed business expenses that go on despite the forced shutdown or reduction of operations, replace lost revenues and can cover payroll and employee benefit expenses as well. Coverage can also apply for renting temporary locations for the insured to operate.
There is no dollar deductible associated with business income coverage but there is usually a “waiting period” , usually 24 – 72 hours from the time of the damage occurring until the “period of restoration” begins. Losses of income are the differences between income during the period of restoration and “normal” income that the firm would have generated if no physical loss had occurred. Coverage can last up to 1 year or even more, depending on the coverage term chosen by the policyholder.
Business income coverage can be purchased along with optional coverages all designed for very specific needs. Some optional coverages associated with Business income coverage are:
Extra Expense Coverage
Covers the necessary expenses and insured incurs during the period of restoration that not normally would have occurred if there had been no physical
loss. Extra expense includes amounts paid to minimize the suspension of normal business operations. Unlike regular business income coverage that usually begins after a waiting period from the time of loss, there is no waiting period under extra expense coverage.
Loss of Rents
If a landlord’s building is damaged or destroyed and as a result the tenants no longer have to pay rent, loss of rents will provide income until the building is repaired and tenants can resume occupancy.
If a business has a very favorable lease and the building is damaged to where the business tenant must move elsewhere and pay higher rent, rental value coverage will pay for the increase in the tenant’s rent.
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