In business interruption insurance, what does a 'specified working expense' imply?

A 'specified working expense' in the context of business interruption insurance refers to expenses that fluctuate based on the activity level of the business. This means that these costs are impacted by the scale of operations—when business activity increases or decreases, these expenses will correspondingly vary.

For instance, if a business experiences a surge in sales, it may require more resources, leading to higher utility bills or increased costs for materials and labor. Conversely, during times of reduced activity, these expenses would typically decrease. Recognizing this aspect is vital for insurance claims, as it helps businesses accurately report and recover their variable operational costs during periods of disruption.