Which is a potential limitation of Extra Expense Insurance?

Extra Expense Insurance is designed to reimburse a business for additional expenses incurred in order to continue operations following a covered loss, such as a fire or natural disaster. The coverage includes costs such as temporary relocation fees, equipment rental, and other expenses that are necessary to keep the business running during the time it cannot operate normally.

The correct understanding of the limitation highlighted in this context refers to the coverage being primarily focused on temporary rental fees. This means that while businesses can use the insurance to mitigate extra costs incurred while re-establishing their operations, it may not cover all types of expenses incurred. For instance, if a business were to incur expenses outside the scope of temporary rentals, such as capital improvements or permanent operational changes, those costs may not qualify for coverage under this specific type of policy.

This rationale underscores how Extra Expense Insurance is tailored specifically to address short-term solutions rather than long-term operational changes, making the limitation concerning temporary rental fees a valid point in understanding its coverage.