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Commercial Property Insurance can help provide funds to rebuild a damaged building or replace property that has been destroyed or stolen.  But that’s only part of the problem a business faces when its property is damaged.  What can be done to help the business that can no longer operate because of the damage?  This is where Business Income and Extra Expense Coverage become important.

Take, for example, a Sheet Metal Fabrication shop. If a fire destroys the building or equipment, the income from this operation may stop temporarily, but many of the business’s expenses continue.  Insurance, vehicle expenses, payroll of key employees, and many other bills must still be paid.    What if the company is a building owner who rents its building to another? When the building is damaged, the rental income stops, but bills such as grounds maintenance and property tax continue.

Business Income coverage can help both of these businesses.  In the event of damage to property on the premises by a cause of loss covered by the policy, such as fire or wind, Business Income pays continuing operating expenses and net profit the business would have earned had it been in operation.  Coverage begins 72 hours after the property is damaged and ends when the property should be repaired or replaced and the business opened again.  The policy even gives an additional period of time (often 60 days) for the business to get back to normal levels once operations resume.  If the 72 hour waiting period is a problem, an endorsement can be added to eliminate the wait.

The second important coverage is Extra Expense coverage.  Perhaps it will take 9 months for the Sheet Metal Fabricator to rebuild its building, but it can rent space elsewhere during that time.  Extra Expense coverage pays for above normal expenses to keep the business going until it can resume operations at its original location or at a permanent replacement location.  Extra Expense can also help with things like paying employees overtime to get back in business sooner or setting up office employees to work from home.

Combined, Business Income and Extra Expense Coverages serve as a form of disability insurance for a business.  When written properly, they make sure that the business that has suffered damage to its property doesn’t also suffer damage to its financial condition.   These are valuable coverages no business can afford to be without.