Utility service interruption coverage is also known as “off premises utility interruption”, or “off premises power interruption” coverage is a type of property insurance.
Utility service interruption insurance goes beyond standard property insurance by protecting your business from loss of business income or physical damage originating from a covered cause (such as fire or windstorm) affecting the utility and causing a lack of electricity to your business.
Does My Business Need Utility Service Interruption Coverage?
Commercial property insurance with business interruption protects your business from physical damage due to a covered cause that results in a loss of income.
For instance, what if a lightning strike or heavy wind from a severe storm takes out a power transformer near you causing you to lose power for several days?
Would your business be covered for any loss of income while you had no electricity? the kitchen to shut down for several weeks, business interruption would help pay for the physical damage and the lost income during the time needed to rebuild.
But what if a fire or windstorm causes a blackout and your business loses power…you have to shut down, or all the food in your walk-in freezer goes bad?
Most property insurance policies exclude losses sustained due to an event that occurs off of your premises, such as at a utility.
As such, if you run a crypto mining facility, solar farm or wind farm, and the grid shuts down, you could be out of luck without utility service interruption.
Property Damage And Business Income
Off premises power interruption insurance is comprised of two coverages:
- Property physical damage: Reimburses for property that is damaged or destroyed due to a power interruption.
- Business income (time element): Reimburses for lost income due to a business having to shut down or because it’s unable to operate during a power interruption.
Each may include a deductible. For instance, you may have a $2,500 deductible for property damage and a waiting period of 8, 12 or 24 hours for business income. The lower the deductible, the better… Deductibles, if any, may reflect the total limits of your property insurance coverage for business income and property physical damage.
Note that losses caused by damage to overhead transmission lines may be excluded from a property insurance policy. However, coverage may be available for an additional premium.