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Power Generator vs. Business Interruption Insurance

Power Generator vs. Business Interruption Insurance

7/15/2014

Businesses immediately begin losing money when a power outage occurs. Depending upon the outage cause – severe weather, animals, failing electrical grid equipment – an outage could last anywhere from a few minutes to several weeks.

Many business owners have taken steps to ensure their business can continue to operate during a power outage by installing a standby power generator, while others have chosen to protect their companies from loss of revenue with a business interruption insurance policy. This type of policy is a rider to their existing coverage that specifically covers loss of income a company incurs after a power outage or disaster. The coverage is intended to offset the loss while the facility is either closed or in the process of being rebuilt as a result of the incident. Unfortunately many business owners operate with neither because they cannot determine which will give them the best bang for their buck and protect their livelihood.

Generac breaks down both options to help you make an informed decision.

Standby Power Generators

  • Consistent Power Supply – A standby power generator kicks in within seconds of sensing utility power has been disconnected.
  • Reduces Risk for Loss Revenue/Profits – A standby power generator allows for the continued operation of machinery, computers, security systems, HVAC systems, appliances and more. Employees can continue to provide the products and services customers rely on without any delay or interruption.
  • Competitive Advantage – Your competitor’s customers may need to hire your services to meet their demands if their current supplier is experiencing a long-lasting outage.  This provides you an opportunity to increase revenue and potentially secure new business.
  • Costs – Depending on the size of your business – small, commercial, industrial – return on investment for a standby generator can be achieved in as little as 24 hours after a power outage.

Business Interruption Insurance*

  • Waiting Period – Many policies have an initial waiting period of 24 to 48 hours before a policy takes effect. Businesses will need to absorb revenue losses during this timeframe. When the policy comes into play, coverage is typically not retroactive to the date when the revenue loss began. 
  • Coverage is Limited – Coverage is usually provided for lost net income, temporary relocation expenses (designed to reduce overall costs), and ongoing expenses such as payroll that enables businesses to continue paying employees rather than laying them off.
  • Other Insurance Policy Riders May be Required – Many policies won’t cover a power outage if the outage is related to another event. For example, if a flood causes a power outage and the company doesn’t have flood insurance, the business interruption insurance may not cover losses.
  • Costs – Depending upon the size of your business a business interruption policy could cost between $750 and $10,000 annually.

For more information on the impact power outages have on business revenue, click here.

*Information obtained from the American Insurance Association