Texas General Lines — Property and CasualtyCommercial LinesMedium
A small custom furniture workshop recently experienced a fire that destroyed their building and all contents. While the building is being rebuilt, the owner is renting a temporary space to continue operations. Which part of the Building and Personal Property Coverage Form (BPP) would cover the cost of this temporary rental space?
- AExtra Expense Coverage
- BCoverage for Loss of Income
- CCoverage for Business Personal Property
- DBuilding Coverage
Show answer & explanationAnswer & explanation
Correct answer: A. Extra Expense Coverage
Extra Expense Coverage under the BPP form is designed to cover the necessary expenses incurred by the insured to continue operations after a covered loss, which includes the cost of a temporary rental space. This is distinct from lost income.
Why the other options are wrong
- B. This covers the profit and continuing expenses that would have been earned, not the additional costs to operate.
- C. This covers the furniture and other personal property, not the cost of renting a new space.
- D. This covers the building itself, not the costs associated with continuing operations elsewhere.
Extra Expense Coverage
Coverage that pays for necessary expenses incurred by the insured to continue operations during the period of restoration after a direct physical loss or damage.
- Covers costs beyond normal operating expenses.
- Aims to minimize business interruption.
- Often paired with Business Income coverage.
Memory trick: When the building burns, extra expenses are a must to keep the business churning.