Property and Casualty Insurance Practice Exam

What does Extra Expense Coverage provide reimbursement for?

1. Loss of business income

2. Expenses to maintain business operations after a loss

3. Property replacement costs

4. Building repairs and renovations

The correct answer is: Expenses to maintain business operations after a loss

Extra Expense Coverage is designed to reimburse a business for the additional expenses incurred to maintain operations after a covered loss. For instance, if a business experiences a fire that renders its premises unusable, Extra Expense Coverage would compensate the business for costs such as renting temporary space, renting equipment, or other necessary expenditures to keep the business running during the recovery period. This coverage is particularly valuable because it helps the business minimize downtime and continue serving customers or generating revenue while repairs or replacements are occurring. It specifically targets the expenses that go beyond the usual operating costs, enabling the business to continue its operations despite a setback. In contrast, loss of business income pertains to the income the business would have earned during the downtimes, property replacement costs address the expenses related to replacing physical assets, and building repairs and renovations focus on the restoration of the physical property itself.