You’ve purchased Business Income coverage so you’re protected if there is damage to your property and your business can’t operate. This coverage pays continuing expenses and profit while you’re shut down. But what if you can’t operate because there is no power or no internet service. Will Business Income coverage help you then?
As storms in recent years have shown us, the potential for a business to be shut down for an extended period due to lack of utility service exists. After SuperStorm Sandy in October 2012, many businesses were closed for weeks while utility companies tried to restore power and communication services. Standard Business Income coverage, though, doesn’t cover this type of claim.
Fortunately, there is an endorsement that can add coverage for income lost after a utility interruption. The endorsement is usually called Utility Services – Time Element, although some insurance companies use terms such as Off Premises Power Interruption.
The Utility Services – Time Element endorsement states that Business Income coverage will apply if there is damage to a utility company’s property by a Covered Cause of Loss. Coverage can be written to include Water Supply, Waster Water Removal, Communications Supply or Power Supply Property. If Communications and/or Power Supply are selected, the endorsement can be written to either include or exclude damage to overhead transmission lines. It’s always a good idea to make sure that coverage applies for these overhead lines, because downed lines are often the cause of power interruption.
Making sure that the proper utility services are covered is only part of the solution. It’s also important to make sure that the Covered Causes of Loss are as broad as possible. Most policies include damage by lightning, wind, and other perils, but not by Flood. So if the power is out because a substation has been flooded, there is often no coverage, even if the Utility Services-Time Element endorsement has been added to the policy. It’s always a good idea to ask for coverage caused by Flood, although it may be difficult to obtain, especially for those in flood-prone areas.
The last consideration in adding coverage for interruption of utility services is the waiting period. Most policies don’t start to pay until the business has been shut down for 72 hours. Often, this waiting period can be changed for an additional charge, so be sure to ask about that possibility if the wait is a concern.
Coverage for income lost when utility services are interrupted should be considered by every business owner. Adding this often forgotten coverage to your policy can bring peace of mind when the lights go out.