If your business is without natural gas, phone, Internet or water for more than a day or so, your business can really suffer. And if the lights go out for an extended period of time, your doors could close for good if your business isn't protected against losses caused by utility outages.
Utility services endorsement options
Business property insurance and business interruption insurance cover your costs if an unexpected event – such as fire, a windstorm or vandalism – damages your property and forces you to close for a short time. What they don't cover are any losses your business sustains from a utility interruption, which can result from events occurring off your premises, such as a windstorm, water main break or gas leak.
That's when utility interruption coverage becomes so important. Basic business interruption insurance and property insurance can be expanded to include this coverage with two specific endorsements:
- Utility services – time element
- Utility services – direct damage
How utility interruption insurance works
Let's say severe winds knock down a power line, plunging your business into darkness, or a water main is broken at a construction site nearby, cutting off your water. Depending on your business, your ability to stay open and functioning could be compromised. In this case, utility services – time element insurance would cover your losses, including loss of income and expenses, up to a predetermined time limit or until the power or water service is restored. This coverage is an extension of basic business interruption insurance.
The utility services – direct damage endorsement becomes an extension of your property coverage. It provides protection against damage to your property resulting from an interruption of any of the utility services named in the policy as a result of a covered cause, such as a windstorm. For example, when the electricity is restored following an outage, a power surge could damage your computers or cash register systems.
Practical insurance where you are
While utility interruption insurance is critical in areas where there's a higher risk of damaging storms, such as coastal areas, it's a recommended coverage for virtually any business, anywhere.