Loss from an insured peril may be partially managed with the appropriate use of both the “extra expense” and “expediting expenses” coverages, provided that adequate limits of insurance were procured in the first place. For the contractor, this could mean an extension to the project which translates into additional carrying costs in order to have the project completed. Coverage is intended to include all expenses which would be incurred and will continue in the event of claim this also includes the “net profit” loss which would have otherwise have been earned had no loss occurred.įor the project owner, it will possibly mean a delay of the facility being put to its intended use/occupancy, so instead of earning potential revenues they are incurring additional expenses. The delayed start-up is intended to provide coverage for “future income loss” following substantial completion, which results from a delay in the completion of the construction project when the delay is caused by an insured peril. We usually benchmark the limit of this coverage as a percentage of their initial/aggregate value of these total costs, which is roughly 25 per cent.ĭelay in Start-up: Lastly, we have “delay in start-up” insurance which is time element coverage for property under construction. Recurring soft costs should be insured for 100 per cent of the respective annual value, whereas non-recurring soft costs are typically insured for a one time value.

Soft costs can be considered recurring (i.e., interest charges on project financing and insurance premiums for the dedicated construction and performance guarantee insurance(s), etc.) and non-recurring (i.e., engineering fees). (See an excerpt from a policy defining soft costs in next column.)

Some of the more common soft costs are interest charges on project financing, realty taxes or other assessments, advertising and promotion and additional accounting, legal, architectural, or engineering fees. Soft Costs: Thirdly, we have “soft costs,” which are essentially those additional costs incurred as a result of a delay caused by a covered loss during the “construction” period. However, given its importance of being able to mitigate the overall impact of an insured peril, we have seen more often than not, that the limits provided are insufficient when called up and more often than not overlooked. These coverages are often provided by carriers at no additional cost to the premium and added as a frill cover. These expenses usually are not covered under a typical insurance policy unless specifically included. Commonly, general and administrative expenses include things such as salaries for company executives and wages or salaries for employees, any research and development costs, travel and related expenses, computer support services, and depreciation that may apply to property, equipment, or other company assets over the long-term.Expediting Expenses: Essentially “acceleration expenses” if in event of loss, policy will provide cover for extra costs (such as overtime, express freight, higher early prices) incurred in fast tracking repairs or replacement of a lost or damaged asset, with the intent of mitigating the overall quantum of the loss. These expenses typically appear on a company's income statement as indirect costs and are also factored into the balance sheet and cash flow statements. Recurring general and administrative operating expenses are the normal, ongoing expenses required for operating a company in the company's chosen line of business. A company does not expect non-recurring to continue over time, at least not on a regular basis.Recurring expenses typically appear on a company's income statement as indirect costs and are also factored into the balance sheet and cash flow statements.The main difference between recurring and non-recurring expenses is the difference between regular, fixed expenses one-time or extraordinary expenses.

Expediting expenses meaning