How do we know if we have an adequate limit of insurance for Loss of Income and Extra Expense coverage?
The insurance policy covers against loss resulting from necessary interruption of business caused by direct physical loss of or damage to covered property. The Loss of Income coverage will pay for the loss of rental income that a House Corporation may incur if members have to move to alternative housing due to the property being damaged by an insured peril. The policy will pay for equivalent temporary replacement quarters if you can no longer occupy the facility.
The insurance company will also pay for reasonable and necessary extra expenses incurred in order to continue as nearly as practicable the normal operation of the business. This could include increased costs of providing meal services, payroll, or any legal obligations by contract (for example, taxes or insurance).
Take all of the above into consideration when you determine whether you have an adequate limit of insurance for Loss of Income and Extra Expense. We recommend that, at a minimum, your Loss of Income/Extra Expense limit is equal to a year’s rental income. If you have trouble determining your Loss of Income limit, the annual average is $9,000 per live-in occupant. You may want to use that figure, multiplied by your number of occupants, if you do not have accurate rental income information.
Refer to your Insurance Overview to determine your location’s current Loss of Income/Extra Expense limit.