Business Property Claims: Don’t Forget about Business Income and Extra Expense coverage

So, you have a significant property claim and the physical property damage portion of the loss is underway, including mitigation and repairs. But what about the other costs your business might have sustained because of the loss. These other costs may fall into a category known as Business Income and extra expense, also known as Business Interruption.  Most property policies written today include some type of coverage for Business Interruption. If due to a covered cause of loss, business interruption insurance helps companies replace lost net income, as well as pays necessary and ongoing covered expenses. Some ongoing operating expenses can include:

• Rent or mortgage payments

• Utilities

• Payroll (often limited or optional for certain employees)

• Loan payments

• Insurance premiums

• Taxes

• Temporary relocation costs (sometimes included)

However, there are criteria which must be met for coverage to be afforded

• There must be direct physical damage to covered property

• The damage must be caused by a covered peril under your policy.

• Coverage applies during the “period of restoration” (time needed to repair/rebuild).

• There may be a waiting period

In summary, Business Interruption coverage helps replace lost income and pay ongoing expenses when your operations are suspended due to covered physical damage, while Extra Expense coverage pays for the additional costs necessary to continue operating or minimize downtime after a loss. Together, these coverages protect your business’s financial stability by ensuring you can recover income, maintain essential expenses, and resume normal operations as quickly as possible following a covered event.