As you shop around for commercial insurance, one important aspect to consider is whether or not to add extra expense coverage. Extra expense coverage will finance expenses a business might incur in order to either avoid or minimize a business showdown following a physical loss or disaster. While not necessary for all styles of business, it can prove especially valuable for businesses that have any of the following characteristics:
- Provide ongoing and continuous services that people depend upon every day of the week, such as a data center or airport shuttle service.
- Provide services that are essential to the community, such as a nursing home, credit union, or medical clinic.
- Ability to operate from a temporary location to prevent a complete shutdown.
What Extra Expense Insurance Covers and When
There are two ways extra expense coverage might step in:
1. If businesses are able to continue operations following a property loss or damages, then extra expense insurance will cover any relocation expenses necessary to operate at a temporary facility and any costs necessary to equip and operate normal operations at that temporary location or new replacement relocation.
For example, a data company that sustained fire damage is unable to continue work at its normal location but is able to reopen in a building across the street. Extra expense coverage would cover the costs associated with preparing that new commercial space as this will allow the data company to more quickly reopen business and generate income.
2. If operations cannot continue, then extra expense insurance will pay for any extra expenses needed to repair or replace property immediately to minimize the suspension period of that business.
For example, a commercial office building that incurred damage to its HVAC equipment is unable to heat the building during winter and thus cannot be occupied until the issue is resolved, but the part to repair the equipment cannot be ordered and received for eight weeks. Yet during this waiting period, the commercial office building loses out on its rental income. Extra expense coverage would pay for the expedited shipping of the necessary part and immediate repair in order to the avoid suspension of rental income.
For more information about extra expense insurance, contact our team at Neff & Associates Insurance Services Inc. in Pismo Beach, CA today.