What Does Commercial Extra Expense Coverage Actually Cover?

Operating a commercial business requires thinking about every possible scenario. Even when your company is doing everything right, unforeseen events can interfere with its income stream. Knowing when to add commercial extra expense coverage to your business insurance policy makes it possible to weather any storm that comes your way.

Understand What Your Policy Covers

General commercial insurance covers costs for damage that might occur after a fire or burglary. While you’ll use the property insurance to pay for things such as replacing appliances and other equipment, you’ll often have additional expenses to worry about. Commercial extra expense coverage can help your business replace lost income to pay for expenses such as rent and employee wages until it’s back to normal operations. Similar to other types of insurance, the policy only kicks in when a covered peril occurs. Fires, storm damage, and theft are a few common perils that might cause your business to need extra expense coverage.

Explore the Differences between Business Income & Expense Coverage

After suffering a severe catastrophe, your business might need to temporarily halt its operations. In this case, business interruption insurance is an option that can replace lost income that occurs during the shutdown. Alternatively, extra expense coverage provides compensation to cover rent and other costs that occur if your business needs to temporarily relocate or make other adjustments to remain operational. For example, expense coverage could pay for employee overtime pay when your company needs additional manpower to restore operations.

Know What Qualifies as Extra Expenses

The expenses this type of insurance covers must be considered necessary and reasonable for the operation of your business and its industry. Temporary rent is a common expense companies claim when they must relocate to a new location. There may also be other relocation costs that require coverage, such as moving services or utility setups. Increased advertising needs may arise when your company needs to communicate about changes in the location or schedule. You’ll also want to know the extra expense coverage could apply to paying for expedited shipping for business inventory that might have been destroyed or damaged during a covered loss.

Determine if Your Company Needs Extra Expense Coverage

Small business owners may try to reduce expenses by opting out of certain types of insurance. But extra expense coverage could be what helps your small company continue to operate in the midst of a major catastrophe. For instance, a hair salon may use extra expense coverage to get set up in a temporary commercial building after a building fire. Alternatively, a restaurant might need to rent equipment or a kitchen space to continue working while the permanent location is restored. 

Being able to pay for essential expenses keeps your company from falling behind on payments or having lines of credit shut off during a trying time. Working with your insurance company can help you identify if this type of coverage is essential for your business’s needs. 

Business owners need to make sure they protect their companies and employees by purchasing the right insurance coverage. For affordable, reliable commercial insurance as well as homeowners, renters, motorcycle, and auto insurance Chula Vista, call on the trustworthy professionals at Altra Insurance Services. Reach out to us today to learn how we can satisfy all your insurance needs.