Extra Expense Coverage covers extra expenses to keep your business running after an accident or disaster.
Most business owners understand that insuring your company is a wise move. Investing a few dollars today could mean saving thousands or millions later. As a business owner, you may already have general liability insurance. Although general liability insurance is a great first step, it does not account for expenses that arise in trying to keep a business open in the event of an extraordinary situation. That’s where Extra Expense Coverage comes in.
What is Extra Expense Coverage?
Extra Expense Coverage is a type of insurance one can add to a traditional commercial property policy in order to protect a business from shutting down in the case of an extraordinary situation. Often times, this Extra Expense Coverage kicks in when the commercial property of a business is compromised to the point of threatening the business’s shutdown.
For example, you own a bakery store on your city’s main street. You operate seven days a week from 6am to 5pm daily. One day, a fire erupts and the property of your bakery is severely compromised. Your commercial property policy would cover the cost of repairing the physical property of your business; however, it will take 6 months of work to repair. Extra Expense Coverage would cover the expenses you incur in the interim 6 months in order for you to keep the bakery running and minimize the risk of a shutdown.
Extra Expense Coverage can be a great way to protect your business and keep it afloat in the case of a disastrous event like a fire or tornado. Without Extra Expense Coverage, a business that suffers a prolonged disruption of normal business operations might have to close permanently.
Instances that may be covered by Extra Expenses Coverage include:
- Renting a temporary place of business while your original place of business is being restored
- Any rental equipment needed to continue normal business operations
- Additional labor or human resources needed to transition your business to a new place of business and continue normal business operations
Do I need Extra Expense Coverage?
If you are a business owner that depends on having a physical location to operate your business, your chances of needing Extra Expense Coverage increase dramatically. Because the viability of your business depends on having a physical establishment from which to operate, you are susceptible to serious expenses, if not a complete shutdown of your business, if you face any extraordinary peril unprepared.
Some businesses that rely heavily on a physical location include but are not limited to:
- Restaurants, bakeries, caterers, cafes
- Supermarkets or grocery stores
- Hotels, inns, or hospitality services
- Retail, consumer goods, products
- Service-based businesses like hair salons or auto repair shops
- Data centers or server centers
In addition to these businesses, if your establishment provides services that are essential to your community, you may also want to consider Extra Expense Coverage. Some of these institutions may include:
- Nursing or rehabilitative services
- Hospitals or medical clinics
What does Extra Expense Coverage cover?
Extra Expenses Coverage will cover anything beyond your normal day-to-day operating costs. This means anything above and beyond repairing your business’s physical property that you would not have incurred without the incident that damaged your business’s property, during the period of restoration.
The period of restoration is the time gap between when your property is damaged and when your property has been fully restored and available for regular daily business operations. The period of restoration begins on the date of the property damage and ends when your property has been replaced or restored. However, keep in mind that the period of restoration may not account for any mandatory testing or certifications required at your new property.
Some instances of extra expenses include:
- Replacement of hardware, technology, and furniture
- Paying overtime for your employees or hiring more employees
- Leasing equipment for your business
How do I purchase Extra Expense Coverage?
There are a number of ways you can purchase Extra Expense Coverage. Some of these options are listed below:
1. As a separate insurance policy:
It is always possible to purchase Extra Expense Coverage as a separate insurance policy. You will not have to add it to your current insurance policy. However, going with your current insurance provider may help reduce some of the cost for the insurance.
2. As part of a business owner’s policy:
In addition to purchasing Extra Expense Coverage as a separate insurance policy, you can also elect to include it as a part of your business owner’s policy. A business owner’s policy is a convenient package made typically for small business owners that marries major property and liability risks. A business owner’s policy is a good and convenient option for small business owners who would like the benefits of general protection that covers liability, property, and business income insurance.
Extra Expense Coverage can be purchased in conjunction with your business owner’s policy for a cheaper price than if you were to buy it separately.
3. As a rider to commercial property insurance:
In addition to lumping in an Extra Expense Coverage with your business owner’s policy, you can also add it as a rider to your commercial property insurance. A rider is an extra form of coverage that can be added to your insurance policy, which would add to or amend your original policy. Many insurance providers give you the option to add Extra Expense Coverage to your commercial property insurance.
Extra Expense Coverage vs. Business Interruption Insurance
While Extra Expense Insurance covers your business for costs above and beyond normal operating expenses that are necessary to keep your business solvent, business interruption insurance covers your day-to-day operating expenses, such as utilities and rent, as well as lost income.
There are many things that can happen in the course of running your business that could potentially derail your day-to-day business operations or even threaten your business altogether. As a business owner, you never want to open yourself up to any situation that could completely shutdown all the investment and energy you put into your business. Extra Expense Coverage could mean the difference between staying afloat and losing your business due to one single life-changing event.