When the Lights Go Out: How Off-Premises Utility Coverage Can Help Keep Your Business Running

You’ve worked hard to build your business and you’ve done your best to protect it. You’ve got property coverage in place and maybe even business income insurance. But what happens when your power goes out and it’s not your fault? This common (and costly) insurance gap can leave your business exposed to unnecessary risk.

Imagine this: A storm knocks out the power grid in your area. Your building is perfectly fine, but your business can’t operate—no lights, no internet, no way to serve your customers. Days go by. Revenue drops. Inventory spoils. And then comes the surprise: your insurance might not cover you.

That’s because most standard policies only cover damage that happens on your property. When a utility failure happens off-site—say, at a power station or water main—it’s often excluded unless you’ve added special protection.

That’s where off-premises utility coverage comes in. This coverage can help replace lost income, cover extra expenses, and protect your inventory when a utility failure disrupts your operations—even if the damage didn’t happen on your premises.

In this article, we’ll walk you through what off-premises utility coverage is, why it matters, and how to make sure your business is protected when the unexpected happens.

A Common Coverage Gap You Might Not Know About

Most business owners assume their commercial property insurance will cover any damage that keeps them from operating. In many cases, that’s true. If there’s a fire, storm, or burst pipe at your location, your policy is likely to respond.

But here’s the catch: if the issue starts somewhere else, like a downed power line or a problem at a water treatment facility, your insurance might not cover you.

That’s because most standard commercial property policies include something called a utility services exclusion. In plain terms, that means if the power, water, or communication failure starts off your property, it’s not covered, even if it causes major disruption to your business.

That’s where off-premises utility coverage comes in. This optional endorsement can be added to your coverage and is designed to cover these types of situations. It fills in the gap by extending coverage to losses caused by damage to utility property that’s located away from your business.

In short, it protects your bottom line when your business is up and ready to serve, but service from the grid, pipes, or cables are interrupted.

What’s Actually Covered?

When it comes to off-premises utility coverage, one size doesn’t fit all. You’ll need to choose which utility services are covered. Here are the main types of utility property you can generally include:

Power Supply – Think generating plants, transformers, substations, and transmission lines that bring electricity to your building.

Water Supply – This includes water mains and pumping stations, which are critical if your operations rely on clean running water.

Wastewater Removal – Sewer mains and wastewater pumping stations. Not glamorous, but essential, especially for restaurants, clinics, and any business that can’t operate without sanitation.

Communication Services – These are the systems that support your internet and phone—fiber optics, coaxial cables, even microwave relay stations. If your business depends on online orders, call centers, or cloud systems, this is an important one.

Pro Tip: Overhead lines are usually not covered unless you specifically add them. That includes power and communication lines strung between poles. If you’re in a rural or older area with lots of overhead lines, make sure this is on your radar.

Choose Carefully

Coverage only applies if the utility property listed in your policy is damaged by a covered event. So, for example, if you include power supply but skip communication services, and a phone outage shuts you down? That loss likely won’t be covered.

Direct Damage vs. Time Element Coverage—What’s the Difference?

Once you know standard policies don’t cover off-site utility failures, the next step is choosing the right type of coverage. There are two main options, and each is designed to protect your business in different ways:

1. Direct Damage Coverage

This kicks in when a utility failure causes physical damage to your property.
For example, if a windstorm takes out a power station, and the outage ruins your refrigerated inventory or damages your equipment, you would be covered. Direct damage coverage helps cover the cost to replace or repair what was lost, up to your policy limits.

Pro tip: You’ll need to choose which utilities are covered—like power, water, or communications—and whether you want to include overhead transmission lines.

2. Time Element Coverage

Also called service interruption coverage, this type of insurance helps when your operations are temporarily shut down due to a utility failure. For example, if a storm damages a water pumping station, and you have to close your doors for three days, you should. Time element coverage can help replace lost income and cover extra expenses, like renting a generator or relocating temporarily, while you get your business back up and running.

Just like with direct damage coverage, you’ll choose which utilities and infrastructure are included in the policy. To figure out what your needs are, it’s a good idea to talk to an local insurance company to get the customized coverage that meets your needs.

Why Many Businesses Need Both

These two forms of coverage work together to cover different types of losses. For example, a grocery store might need direct damage coverage for spoiled food and time element coverage to recoup lost revenue while closed.

If you deal with a lot of perishable goods, there’s also a third option: spoilage coverage. This can protect perishable stock during power outages even if the outage wasn’t caused by a covered peril, making it a valuable layer of protection for food-based businesses.

Overhead vs. Underground—Why It Matters

When you’re choosing off-premises utility coverage, there’s one easily overlooked detail that can make a big difference: whether or not to include overhead lines.

These are the power and communication lines you see strung between poles. They’re exposed to wind, ice, falling trees, and even car accidents.

Standard utility endorsements usually exclude overhead line damage unless you specifically add it. If your business relies on overhead infrastructure, you’ll want to include it in your policy schedule.

If your utilities are delivered via underground lines (common in newer developments), your risk of physical damage from storms is lower, but not zero. Talk to your agent about what’s most likely in your area.

Understanding Waiting Periods & Coverage Limits

One thing that sets off-premises utility coverage apart from standard property insurance is the waiting period, and it’s something you’ll want to pay close attention to.

What’s a Waiting Period?

Most policies come with a 72-hour waiting period. That means your coverage won’t kick in until you’ve been shut down for three full days. It’s like a time-based deductible. You can often shorten the waiting period to 48 hours, 24 hours, or even zero, for an added premium.

Pro tip: Think about your business’s tolerance for downtime. How long can you afford to wait before coverage begins?

Setting the Right Coverage Limits

Off-premises utility coverage may have its own limit, so you’ll want it to reflect your true exposure.

Let’s say your business loses $20,000 in revenue per day during an outage. If a typical local outage lasts five days, a $100,000 limit would be a reasonable baseline, plus a little extra to cover unforeseen costs like temporary equipment or relocation.

More Outages, Older Infrastructure—A Growing Risk

Utility failures are becoming more frequent. Why?

• Aging infrastructure: Many power grids, water systems, and communications networks were built decades ago.
• Climate change: More frequent hurricanes, wildfires, heatwaves, and ice storms are putting strain on those systems.
• Everyday accidents: Construction crews cut fiber lines. Cars knock down poles. It doesn’t take a natural disaster to cause disruption.

That’s why off-premises utility coverage is becoming a key part of many businesses’ risk management toolkit.

The Hidden Cost of Utility Outages—Equipment and Data Loss

Some outages don’t just shut down operations. They can also damage your tools and equipment. For example:

• Machines can jam or break during sudden power loss.
• Electronics can get fried by a surge.
• Data can get corrupted if systems shut down without warning.

If your business relies on digital systems, be sure you have strong data backup procedures—and consider additional cyber or electronic data coverage.

Why This Coverage Matters for Your Business

No matter what industry you’re in, utilities are the lifeblood of your business. When they go down, operations and revenue often go down with them.

Consider the financial impact of an outage. Something as simple has having no electricity can:

• Take registers offline.
• Stop orders from flowing.
• Shut equipment down.

Some outages also bring spoiled inventory, canceled appointments, or temporary closures. You may also face unexpected costs, like renting a generator or relocating temporarily.

Without the right coverage, those expenses could fall on your business.

Who Needs This Coverage Most?

Some industries are especially vulnerable to utility outages. These include:

• Manufacturing plants – Delayed shipments, halted production
• Food service & cold storage – Spoiled goods, lost income
• Healthcare facilities – Risk to patient care and operations
• Tech companies & data centers – Service disruptions, data loss
• Retail (especially e-commerce) – Frozen systems, lost online sales
• Hotels and hospitality – Guest service failures, mass cancellations

Even “low risk” businesses like law firms or salons rely on utilities for core functions. Don’t underestimate how disruptive an outage can be.

How to Evaluate and Choose the Right Coverage

Here’s a simple checklist to guide your decision:

1. List the utilities you rely on (power, water, internet, etc.)
2. Understand how they’re delivered (overhead or underground lines?)
3. Think about what’s likely to disrupt service (weather? grid reliability?)
4. Estimate your potential losses (daily income & extra expenses)
5. Select the right endorsement(s)
   • Direct Damage
   • Time Element
   • Spoilage
6. Choose your waiting period (72 hours? 24? 0?)

Revisit coverage annually to reflect changes in your operations

Frequently Asked Questions (FAQ)

What is off-premises utility coverage?

Off-premises utility coverage is an optional insurance endorsement that helps protect your business from losses caused by utility service interruptions that originate away from your property. That includes things like power outages, water supply issues, or communication failures caused by damage to a substation, pumping station, or utility pole down the road.

Doesn’t my standard business insurance already cover this?

Not usually. Most commercial property and business income policies include a utility services exclusion, which means they won’t cover losses if the outage starts off-site. Off-premises utility coverage closes that gap.

What types of utilities can be covered?

You can generally choose to cover:

• Power supply (e.g., substations, transformers)
• Water supply (e.g., water mains, pump stations)
• Wastewater removal (e.g., sewer systems)
• Communications (e.g., fiber optic lines, phone systems)

Be sure to specify which utilities and whether overhead lines should be included in your policy.

What’s the difference between “direct damage” and “time element” coverage?

• Direct damage coverage: Covers physical damage to your property caused by a utility outage—like spoiled inventory or damaged equipment.
• Time element coverage: Covers lost income and extra expenses during a shutdown caused by a utility failure.

Most businesses benefit from having both.

What’s a waiting period, and why does it matter?

It’s the amount of time you have to be without service before your coverage kicks in. The standard is 72 hours, but you can often reduce it (to 48, 24, or even 0 hours) depending on your policy and budget.

Are overhead power lines included?

Not by default. If your business depends on above-ground utility lines (common in older or rural areas), you’ll need to specifically request that they be covered in your policy endorsement.

Is this coverage expensive?

The cost depends on your industry, size, location, and the utilities you choose to cover. That said, it’s often an affordable add-on that can save you significantly more than it costs if your business faces a utility-related shutdown.

How do I know if I need this?

If you’d lose money or face major disruption from a power, water, or internet outage that starts off-site, this coverage is worth considering. A quick chat with your insurance advisor can help you assess your risk and coverage options.

Protecting Your Business Beyond the Building

Power. Water. Internet. These are the things you may not think about until they’re gone.

Off-premises utility coverage is designed to bridge the gap when an outage happens beyond your control but still shuts you down. It helps cover lost income, protects valuable inventory, and supports your recovery.

You can’t control the power grid. But you can control how ready your business is when the lights go out.

Talk to an insurance professional to review your current policy and explore whether this coverage is the right fit for your business. It could be the difference between riding out an outage or being shut down by it.

Need to learn more about off-premises insurance?

Our agents are ready to help, so contact us to learn how we can customize your insurance policies to meet your needs.

*Disclaimer: We offer content for informational purposes; Co-operative Insurance Companies may not provide all the services or products listed here. Please get in touch with your local agent to learn how we can help with your insurance needs.

Sources

AEGIS. What is Off-Premises Utility Coverage, and Does Your Business Need It? https://www.aegisifs.com/blog/what-premises-utility-coverage-and-does-your-business-need-it

FAIA. Off Premises Utility Failure. https://www.faia.com/resources-(1)/agency-catastrophe-guide/post-storm-information/off-premises-utility-failure

IRMI. Utility service interruption coverage.https://www.irmi.com/term/insurance-definitions/utility-service-interruption-coverage