PROPERTY POLICIES · 6 MIN READ

Business Income, Extra Expense, and Builders Risk

Property-element forms pay to rebuild property; time-element forms pay for the income the business loses while rebuilding. CP 00 10 is the canonical property-element form; CP 00 30 Business Income (and Extra Expense) is the canonical time-element form, paying lost net income plus continuing normal operating expenses during the period of restoration, plus Extra Expense incurred to keep operating or speed the recovery. The period of restoration for Business Income begins 72 hours after the direct physical loss and ends when the property should, with reasonable speed, be repaired or replaced. Extra Expense, by contrast, begins immediately at the time of loss — no 72-hour wait — because it exists to mitigate the shutdown. The 72-hour waiting period can be eliminated by endorsement (CP 15 56). Related forms extend the concept: dependent-properties endorsements cover income lost when a key supplier's or customer's premises are damaged, and discretionary payroll and civil authority provisions refine what continues to be paid. Business Income carries its own coinsurance condition, with selectable percentages of 50, 60, 80, 100, or 125 percent of annual business income value. To escape the coinsurance-penalty risk, the insured can attach CP 15 03 Business Income Agreed Value: submit the Business Income Report/Worksheet, agree on a value with the carrier, and coinsurance is suspended for the period. The critical limitation is that the limit is still the limit — if actual exposure turns out higher, the insured collects only up to the agreed limit with no penalty on top, so agreed value cures the penalty, not under-purchase. Builders Risk applies the same direct/indirect split to construction projects. CP 00 20 Builders Risk covers direct physical loss to the building under construction (CP 00 21 is the reporting-form variant whose premium tracks reported values), and coverage terminates on defined triggers such as occupancy or acceptance. The soft-costs endorsements (CP 11 31, and a similarly purposed CP 14 60 soft-costs form) add delay-in-completion coverage for scheduled indirect expenses caused by a covered loss: additional construction-loan interest, additional real estate taxes, extended architect and engineering fees, added advertising and marketing, and legal and accounting costs — capped at the scheduled endorsement limit. Lost profits on the project and liquidated damages owed to buyers are typically not covered soft costs. Rounding out the family, CP 00 40 Legal Liability covers the insured's liability for damage to property of others in its care, and the mortgageholder's errors and omissions forms protect lenders when borrower coverage fails.