Extra Expense Insurance – What It Is & How It Works

Extra Expense Insurance – In preparation for the unexpected, it’s important to ask yourself: Do you have a plan in place to swiftly reopen your business in the event of a disaster? Have you set aside funds to secure a temporary location while your primary premises undergo repairs? Are you equipped with strategies to retain key employees during business interruptions?

Extra Expense Insurance - What It Is & How It Works

These considerations are integral components of effective risk management and business continuity planning. It’s imperative to have a clear understanding of how you’ll resume operations and cover expenses when your revenue-generating capacity is compromised or severely restricted.

Included within business continuity insurance, also referred to as business income insurance, is extra expense coverage. This coverage is a feature of commercial property insurance policies and activates in response to direct physical damage to your business’s contents or building.

In this article, we will explore the concept of extra expense coverage and the specific ways it can safeguard your business.

What Is Extra Expense Insurance?

Extra expense insurance is a specialized form of coverage crafted to address additional costs that a business might encounter to sustain operations following damage or disruption caused by a covered peril.

Unlike conventional property insurance, which primarily addresses physical damage to buildings or contents, extra expense insurance specifically targets the additional expenses businesses incur to prevent or reduce downtime and uphold regular operations.

How Does It Work?

In the event of a covered incident disrupting or impeding normal business operations, extra expense insurance steps in to cover the essential additional expenses beyond the company’s typical operating costs.

The primary goal is to minimize or mitigate interruptions and expedite the return to regular business activities.

 Policyholders usually receive compensation for these additional costs upon filing and submitting claims, which outline the extra expenses accrued as a result of the disturbance or interference.

What Does Extra Expense Insurance Cover?

Extra expense insurance covers a variety of additional costs, including scenarios like the ones mentioned below:

  • Temporary relocation.
  • Lease or rental of equipment.
  • Overtime pay.
  • Expedited shipping.
  • Additional advertising.
  • Professional fees.

What Is Not Part of Its Coverage?

Extra Expense Insurance does not cover:

  • Pre-existing conditions.
  • Physical damage to property.
  • Business interruption losses.
  • Governmental fines and penalties.

Who Needs Coverage?

Think about getting extra expense coverage if:

  • Your Offerings Are Critical: That is to say, if your operations were halted for more than a short period, it is probable that your customers would turn to competitors.
  • Relocating Temporarily Is Feasible for You: Shifting to a different site could mitigate some of your costs as your original business location is being repaired.
  • Temporary Equipment Is Readily Obtainable for You: If the tools and machinery you depend on can be quickly found and utilized elsewhere, it would simplify the process of moving your operations to a new site.

How Much Does Extra Expense Insurance Cost?

The expense associated this type of insurance can vary significantly, contingent upon factors. These factors include: business size, industry, location, and the desired coverage amount.

However, rates are computed based on the business’s risk profile, with higher-risk enterprises generally facing higher premiums.

Therefore, businesses should solicit quotes from multiple insurance providers to obtain a precise estimate customized to their requirements.

How To Get Extra Expense Insurance

The process of securing this type of insurance involves only a few key steps. If you need assistance with this procedure, here is a brief step-by-step guide that you can follow to successfully obtain this type of insurance:

  • Assess Your Needs: Evaluate your business’s risk profile and the potential costs of disruptions.
  • Shop Around: Compare quotes and coverage options from multiple insurance providers.
  • Review Coverage Details: Carefully review the policy details, including covered perils and exclusions.
  • Purchase Coverage: Select the best policy for your needs and complete the purchase process.

With these steps above, you will have no problem obtaining or applying for a quote.

Extra Expense Coverage vs. Business Income Insurance

While Extra Expense Insurance focuses on covering the additional costs to keep a business operational after a disruption. Business Income Insurance (also known as Business Interruption Insurance) compensates for lost income during the period a business is unable to operate as usual.

These two coverages often complement each other, providing a comprehensive safety net against a range of post-disruption financial challenges. Many businesses opt for a combined policy that includes both types of coverage to ensure maximum protection against unforeseen events.


Obtaining extra expense insurance is a strategic move for businesses aiming to fortify their resilience against unexpected disruptions.

Businesses can confidently navigate the complexities of insurance procurement by assessing their specific risks, comparing offerings from various insurers, and paying close attention to the nuances of coverage.

This process not only ensures that organizations are adequately protected against additional operational costs during times of crisis. But also positions them to recover more swiftly and efficiently.

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