Off Premises Utility Services Interruption Coverage
A heavy storm is rolling through your area. Lightning strikes a nearby transformer. Your business has no power… for the next three days. Will your property policy respond adequately, if at all?
When manufacturers, wholesalers, distributors and retailers are examining their property insurance needs, the focus in this area tends to be on the larger, “important” items. These items include adequacy of the limits for building, personal property, personal property of others and business income if the business were to experience losses from the “important” perils such as fire, wind, flood and/or earthquake. However, many businesses experience other types of losses that are either excluded completely or are subject to sub-limits because they are only provided through the Extensions and Supplemental coverage portions of their policy. One Extension coverage limit that should be reviewed for adequacy is Off-Premises Utility Services Interruption.
If one of your utility suppliers (water, communication, power) should experience damage away from your premises from a peril (fire, lightning, etc.) that’s included in your property policy’s Cause of Loss form and this damage causes your business to incur property damage, then this extension is where you could potentially be reimbursed by your insurer.
When reviewing your property coverage information with your insurance professional, the following are several items to keep in mind in regards to off-premises utility services interruption:
- There are two separate and distinct limits associated with this coverage and both should be included on your policy:
1. Property damage (PD)
2. Business income/extra expense (BI/EE) [also referred to as Time Element (TE)]
- Losses caused by damage to overhead transmission lines are typically excluded (this is applicable to PD & BI/EE). Some insurance companies will consider including coverage for overhead transmission lines for an additional premium. It never hurts to ask if this is an available option.
- If included at all, property damage limits provided by an insurance carrier typically can range from $2,500 to $25,000. Depending on the size of your business/facility, you may want to consider increasing these limits to the range of $100,000-$500,000.
- If included at all, business income/extra expense limits are usually lower than the property damage limit offered and are subject to a waiting period of 12 hours, 24 hours, 48 hours, or 72 hours. At a minimum, you may want to consider increasing the BI/EE limits to match your PD limit or, depending on the size of your business/facility, you may want to also increase these limits to the range of $100,000-$500,000. Additionally, the fewer the hours for a waiting period, the better.
Contact Assurance today and ensure you’re covered.
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