Extra expense

How it works

Business interruptionBusiness interruptionBusiness interruption insurance replaces income you lose, and helps pay ongoing expenses, when covered physical damage forces your business to close or slow down.Read the definition coverage replaces income you lose while you’re closed. Extra expense pays for something different: costs you wouldn’t have had without the damage, spent to keep operating or to reopen faster. It’s often included with business income insurance.

Depending on the policy, extra expense can help pay for:

• rent on a temporary location
• renting equipment while yours is repaired or replaced
• rush shipping for replacement stock or parts
• overtime to make up lost time
• moving costs and telling customers where to find you

Like business income, it applies only after covered physical damage, and only for costs during the period of restorationPeriod of restorationThe period of restoration is the time business income coverage pays for after covered damage, from the end of the waiting period until your property should reasonably be repaired.Read the definition. On some policies the waiting periodWaiting periodA waiting period is the stretch of time after a covered loss before coverage, such as business income, starts paying, working like a deductible measured in hours or days.Read the definition doesn’t apply to extra expense. It typically won’t pay for upgrades or permanent improvements, and the cost of repairing your own property belongs to your property coverage, not extra expense.

Why it matters for a small business

Sometimes spending money saves money. Reopening in a temporary space can keep customers from drifting to competitors and can shorten how long you’re losing income. Insurers generally want you to take reasonable steps to reduce a loss, and extra expense is what helps pay for them, subject to the policy’s limits and terms.

Keep receipts for every added cost, and note why each one was needed. The guide to how business income claims are calculated shows how these costs fit into the claim.