BUSINESS INCOME WITH EXTRA EXPENSE COVERAGE reimburses an insured for the sum of the net income that would have been earned plus its continuing expenses for the length of time needed to repair property following a covered cause of loss. The approach is in line with generally accepted accounting practices. The coinsurance clause in the form applies to the 12 months after policy inception. Loss of rental income can also be covered by this form. The rental value exposure is usually associated with a building owner. However, there are cases where it may also be significant for a lessee with a lease that requires continued rent payments after a covered cause of loss causes the insured building to be unusable.

Extra expense coverage is included as an automatic coverage feature. This makes use of separate extra expense insurance unnecessary for most businesses. Note that the coinsurance requirement does not apply to this coverage. It pays the extra expenses that are needed in order for the insured to continue operations, including rental of other locations and use of other facilities and other types of expediting expenses.

The business income coverage automatically extends for up to 60 additional days to cover the additional time needed for activities to be restored to the level that existed before the loss occurred, provided the limit of insurance has not been exhausted. If concerns exist over loss of market and the amount of additional time needed to reach the normal income plateau, the 60-day extension may be increased for an additional premium charge. Ninety days is often a more appropriate extension of time. However, it may be necessary to increase the limit of insurance because once the limit is exhausted, coverage ceases.
(Use ACORD Form #810)
Related PF&M Article: Time Element Coverage Forms Overview