Which term describes the additional costs a business incurs to continue operations after a loss?

• A. Direct physical damage.
• B. Extra expense losses
• C. Lost business income.
• D. Insurance premiums.

Answer: (B)

This question focuses on the costs a business incurs to keep operating when a loss has disrupted normal operations. The term that describes these incremental expenses is extra expense losses. They cover the additional spending needed to continue operations or to resume them quickly, beyond what the business would normally spend. Examples include renting a temporary facility, overtime pay, expedited shipping, or obtaining temporary equipment—anything that helps sustain operations during the recovery period.

Direct physical damage refers to the harm to the property itself, not the ongoing costs to operate after the loss. Lost business income is about the revenue the business would have earned but for the disruption, not the extra costs incurred to continue operating. Insurance premiums are ongoing costs for maintaining coverage and aren’t the post-loss expenses intended to keep operations going.