Business Income and Extra Expense

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Property coverage can protect a business from physical damage to its property from fire, windstorm, vandalism and other similar events. Sometimes, the covered damage prevents a business from operating. In those situations, the business's revenue may decline or even come to a halt. Business Income coverage provides protection against certain financial losses that are sustained while the business is unable to operate due to one of the events mentioned.

Business Income is generally defined as the net income (net profit or loss) plus normal and continuing operating expenses. Extra Expense is generally defined as expenses reasonably and necessarily incurred to avoid or minimize the period in which the business is unable to operate.

The time frame during which these coverages apply is referred to as the period of restoration. The period of restoration begins when covered damage forces a business to suspend its operations, and it ends when the covered damage is, or reasonably could have been, repaired and normal operations resumed.

Some policies also include Extended Business Income coverage. This coverage may provide protection against a loss of business income that continues after operations have been resumed and the period of restoration has ended. The timeframe during which this coverage applies is typically specified in the policy.