Power Play

There's a small fire in the electric company's substation, or a transformer blows, and power to your facility is knocked out for several hours. What will that mean to your operation? For most companies, a power failure that lasts longer than just a few seconds can have significant consequences. Production halts, phones stop ringing, refrigerators warm up, heaters cool down--all of which translates to lost sales and physical damage that may not be covered by your basic property and casualty insurance.

If your power goes out because of, say, a fire in your own plant, your property insurance will probably pay. But to be covered when the power goes out because of damage to an off-site facility that's not under your control, you need off-premises power failure coverage. Usually set up as endorsements to standard property policies, this insurance typically covers damages suffered due to the loss of power, water and communication supplies because of an occurrence at another location. Rates vary, but you can expect to pay $2.50 to $3.50 per $1,000 of coverage annually.

Not all such policies are created equal, however. Some cover physical property damage only, some include electronic data, and some also cover lost revenue. So shop wisely.

Jacquelyn Lynn is a freelance business writer in Orlando, Florida.