How Much Extra Expense Coverage Does A Bank Need?

Extra expense coverage pays the increased cost of getting your bank back to serving customers after a fire, windstorm, or other insured calamity that damages your building. It will pay to relocate employees, rent temporary quarters, and rent temporary bank modules.

The challenge in extra expense coverage is setting the amount of insurance.

Frankly, setting extra expense limits is more art than science. I have only general guidelines that I came up with based on educated guesses. I admit to never having a bank lose a branch or main office.

For Each Location:

Number of employees at a location multiplied by $5,000
Add $100,000 If it’s a Computer Center
Add $100,000 as a “Location Constant”

I have also used the simplified idea that all branches should have $250,000 and major locations $500,000.

I fully admit this is sophistry but it seems to be better than what anyone else has come up with. I’m open to a better process put forth by anyone willing to try.

Think about the difficulty in getting temporary office space, setting up computer networks, phone lines, electricity, temporary furniture, dividers, and other fixtures. Will you rent a mobile branch unit? When in doubt, buy more. Extra expense coverage is relatively inexpensive. Best not to scrimp.