Question

Can I file a business insurance claim for a power outage?

Answer
By Jacques Wong | Last updated: October 18, 2017

If the power goes out and I can't run my business for a while, can I file an insurance claim?

This is a tricky one, since commercial insurance policies vary widely from insurer to insurer with wildly differing terms. Moreover, the cause of the power outage also plays a factor in whether or not your business interruption insurance will cover you.

Let’s start by going over business interruption insurance and why it's an important purchase for business owners. Basically, what this coverage does is restore your lost income in the event of an interruption to your business due to physical damage caused by an insured peril. As you know, even if your business stops operating, your costs won't. Rent, salaries, and other expenses will keep accruing. Without business interruption insurance, you're left to pay for this out of pocket, all while generating little to no income. That's not easy for any company, but for small to medium businesses, it can be downright disastrous (for related reading, see How to Protect Your Business from Coverage Gaps Related to Equipment Breakdowns).

One of the scenarios you might face is not being able to operate your business because of a power outage. If you've got business interruption insurance, you might be covered for the losses related to the outage, but it all depends on the specific wording in your policy. The cause of the outage might matter, and your coverage might only kick in if the outage lasts for a certain duration.

For example, if a fire damaged the fuse box in your unit and caused the power to go out, then your insurer would naturally step in to pay because your business has suffered physical damage that caused operations to be interrupted. If, however, the power outage was caused by the failure of a public utility, you may not be able to get compensated for these losses unless you have something that is typically called a "services away from covered location extension" on your policy. This extension insures you for interruptions caused by physical damage to specific pieces of equipment located away from your premises, such as a downed power line somewhere down the block. Even with this endorsement, you still won't be covered unless physical damage is involved, meaning that you'll have to bear the losses if the outage is caused by routine maintenance from the utility company.

That being said, some policies cover power outages by default. The British insurance company Aviva’s business interruption insurance, for instance, advertises coverage for blackouts or extended power outages, while some other policies I’ve reviewed don't include coverage for power outages. But as you can see from the phrasing "extended power outages," the duration of the outage still plays a role in whether you have coverage or not.

As you can surely tell, it’s quite a nuanced topic and these are just some things to consider when reviewing your insurance coverage. If you’re concerned about power outages causing business interruption losses, review your current policy with your insurance advisor and work with them to make sure you have the right coverage in place.

Share this Q&A

  • Facebook
  • LinkedIn
  • Twitter

Tags

Coverage Income Protection Insurance Commercial Lines

Written by Jacques Wong

Profile Picture of Jacques Wong

Jacques grew up around the insurance industry and began actively participating in 2013. Since then, he has gotten a Level 2 license, won Insurance Council of BC awards in 2015 and 2020 for academic excellence in the insurance licensing courses. He educates insurance professionals through PNC Learning and as a Thought Leader at ReFrame Insurance.

In his day job as an insurance broker, he helps businesses with creative risk management solutions and strategic advice when it comes to insurance.

More Q&As from our experts

Related Articles

Term of the Day

Indemnity Plan

An indemnity insurance plans allow individuals to direct their own healthcare and visit almost any doctor or hospital they...
Read Full Term

Subscribe To the Insuranceopedia Newsletter!

Do you want to stay on top of New Terms, New Products, Free Software, and Specials? Join one of our email newsletters. It's fast and easy. You will be among the first to know about hot new insurance related articles, goodies and great deals - it will only take seconds!

Resources
Go back to top