Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Property InsuranceEasy
A client operates a small print shop and has a Commercial Property Policy with a Building and Personal Property (BPP) coverage form. Due to a covered fire, their printing presses are severely damaged, and they are unable to fulfill orders for two months. To mitigate losses, they rent temporary equipment and a small space at another location. Which of the following coverages would respond to the cost of renting the temporary equipment and space?
- ABusiness Income coverage
- BOrdinance or Law coverage
- CLeasehold Interest coverage
- DExtra Expense coverage
Show answer & explanationAnswer & explanation
Correct answer: D. Extra Expense coverage
Extra Expense coverage pays for necessary expenses incurred during the period of restoration that are over and above normal operating costs, to expedite the return to business or to continue operations at a temporary location.
Why the other options are wrong
- A. Business Income coverage would cover the loss of income, not the additional expenses incurred to minimize the shutdown.
- B. Ordinance or Law coverage addresses increased costs due to building codes or laws after a loss, not for temporary operational expenses.
- C. Leasehold Interest coverage protects a tenant for the value of their favorable lease that is lost due to a covered peril, not for temporary operational costs.
Extra Expense Coverage
Extra Expense coverage pays for necessary expenses incurred during the period of restoration that are over and above normal operating costs, incurred to continue operations or minimize the suspension of business.
- Covers expenses to avoid or minimize business suspension.
- Examples include temporary relocation, equipment rental, overtime wages.
- Distinct from Business Income, which covers lost profits.
Memory trick: Income covers lost sales, Extra Expense covers temporary fails.