Property losses can lead to any or all of the following financial consequences: -
· Reduction in the value of property
· Lost income
· Extra expenses
Reduction in the value of property (Direct Loss)
Direct loss is a reduction in the value of property that results directly and often immediately from damage to that property.
Time Element (Indirect) Loss
These include loss of income or extra expenses resulting from direct loss to property. This type of loss is called “time element” because it takes place over a period of time such as days, weeks, months or even years following a direct loss.
Lost Income
Business income insurance protects a business from income lost because of a covered direct loss to its building or personal property.
Covered business income includes the organization’s net profit (income minus expenses) that would have been earned if the insured property had not been damaged.
It also includes the operating expenses that continue while the business is interrupted.
Extra Expenses
These are expenses that reduce the length of a business interruption or enable a business to continue some operations when the property has been damaged by a covered cause of loss.
Additional Living Expense
This is a coverage in homeowners policies that indemnifies the insured for the additional expenses incurred following a covered property loss so that the household can maintain its normal standard of living while the dwelling is uninhabitable.
Property Loss Exposures
