Other Than Life (OTL) Practice Exam

What does Extra Expense insurance provide for a firm?

1. Covers income lost from plant shutdown

2. Useful when a firm can carry on after a loss

3. Alternative to Gross Earnings Insurance

4. Usually subject to a Co-insurance clause

The correct answer is: Useful when a firm can carry on after a loss

Extra Expense insurance is designed to help businesses cover the additional costs incurred to maintain operations following a loss, rather than compensating for lost profits or income directly. This type of insurance is particularly beneficial when a company can continue functioning, albeit at a higher expense, after undergoing a damaging event such as a fire or natural disaster. For instance, a business might need to rent temporary space, lease equipment, or pay overtime to staff in order to keep services running and minimize disruption. The focus of Extra Expense insurance is primarily on these extra costs incurred to ensure continued operation, rather than covering income losses directly or replacing gross earnings. In contrast, while other options may touch on aspects of business insurance, they do not capture the essence of Extra Expense insurance as precisely as the correct answer does.