Extra Expense Coverage

Example

“After fire damaged their warehouse, the company's extra expense coverage paid for expedited shipping and temporary storage facilities to fulfill customer orders.”

Memory Tip

Extra Expense = Extra costs to Exist - it covers the extra money you spend to keep your business alive after a disaster.

Why It Matters

Extra expense coverage can mean the difference between business survival and bankruptcy after a disaster. It helps companies maintain customer relationships and market position by funding whatever it takes to continue operations, even if more expensive than normal methods.

Common Misconception

Business owners often think property insurance covers all costs related to disasters. Property insurance only pays for physical damage, while extra expense coverage addresses the often-higher costs of continuing business operations during recovery periods.

In Practice

A bakery suffers kitchen fire damage requiring 6 weeks of repairs. Normal monthly costs are $20,000, but maintaining operations requires renting temporary kitchen space ($8,000/month), overtime labor ($4,000/month), and expedited ingredient delivery ($2,000/month). Extra expense coverage would reimburse the additional $14,000 monthly cost ($84,000 total) to maintain business operations, preventing customer loss and preserving the company's market position during repairs.

Etymology

Developed in the mid-20th century as businesses became more complex and insurers recognized that simple property coverage didn't address the full cost of maintaining operations after disasters.

Common Misspellings

Related Terms

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