When are extra expenses covered under a business income policy?

Extra expenses are covered under a business income policy to the extent that they help to reduce the total business income loss. This coverage is designed to assist businesses in covering additional expenses that arise due to a direct loss event, rather than just the operational income loss. For instance, if a fire causes a business to close temporarily, any extra costs incurred to maintain operations—such as renting equipment or securing a temporary location—can be covered. This is critical for businesses looking to minimize downtime and continue generating income, even in the face of adversity.

The notion that these expenses are only applicable to indirect losses or that they are not covered at all does not align with the purpose and function of such policies. Extra expenses are specifically structured to mitigate losses and promote ongoing operations, which is why they are integral to business income policies.