To my surprise I got called out on the absence of a follow-up to a prior Blog Post. As previously indicated, I work with the assumption that this Blog is largely ignored, so I can state things like “in the next post we will cover….” and if I fail to (or don't want to) get back to the topic, no big deal. I think the assessment is fairly accurate. However, in this instance I do apologize to the requesting party - a Man of unquestionable intelligence. So, here is the follow up to this Post:
EXTRA EXPENSE:
Most Businessowner’s (BOP) policies will, in addition to Business Income, also include Extra Expense Coverage. Extra Expense will cover just that – the Extra Expenses a Business Owner incurs due to a covered cause of loss.
Let’s take a claim scenario of a wholesale food manufacturer. The owner leases space in a building that was damaged by Straight Line Winds. Surprisingly there is not much damage to the Owner’s Property in the building. However, the building inspectors declared the building uninhabitable until all necessary repairs were made. The owner is a key supplier to many local and National Grocery Stores so a lengthy disruption of operations could be devastating for the business, since these Stores would likely be forced to find other suppliers.
The Owner realizes she has to do whatever she can to maintain operations and realizes that she will have to:
- Find a temporary location to manufacture her product while her operation is shut down. A local Food Manufacturer contacts her about sharing space at their location – Perfect, but now she has a new monthly expense (rent, shared utilities, etc).
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She needs to move her equipment in order to be able to fully operate at the temporary location - so she has to hire a company to remove, load and move her equipment to the temporary location. This project requires a supervisor to oversee the job and the project is not cheap but it is necessary (another Extra Expense).
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Due to the claim, operations have been disturbed to the point where overtime is necessary and an additional temporary employee is needed to keep up with existing orders.
All of the above are significant expenses for a small business. Depending on the Profit Margins of the business, the above extra expenses could be crippling. This is how Extra Expense Coverage Saves the Day! All of the above are Extra Expenses incurred as a result of a covered loss. The Insurance Company will pay for all of the above since the Expenses are Necessary to keep the Business “Whole.”
This example illustrates why the Business Income and Extra Expense portion of a BOP can be even more valuable than the actual coverage for the Business Personal Property.
Hopefully this post proves valuable to some or someone you know. If so, please fell free to use the LinkedIn or email share buttons below.
Posted by dan@hebbeln-ins.com