When the power goes out – is my business covered?

During September 2016, two severe storm fronts swept across South Australia in what could be described as one of the most extreme weather systems to hit in 50 years.

While the entire state was without power for several hours, many businesses were without power for several days, resulting in a significant loss of turnover.

Is this type of loss covered by business insurance? Short answer is, it depends on the type of policy you have.

Firstly, for any claim to be paid as a result of loss of turnover, the business must have business interruption insurance. Unfortunately, many Australian businesses operate without business interruption insurance. Business Interruption insurance covers the shortfall in gross profits caused by the interruption to the business from any insured events. It also helps pay ongoing costs and protects profit margins until the business is back on its feet and at the same profit level before the interruption.

Secondly, although a business may have this cover in place, in some instances, some policies might exclude claims made if the utility (electricity, gas, water supply systems, or land based telecommunications) is not immediately adjacent to the insured premises.

Thirdly, even when your insurance does cover you for utilities not adjacent to the insured premises, there is generally an excess period of 48 hours. This means an outage such as the one in South Australia would only be covered if a business was without power for more than 48 hours. For example some of the businesses who were without power for seven days, would only be able to claim for five days loss of gross profits.

To find out more or precisely what cover your business has in place for power outages, contact us to discuss in more detail.