Power Outages and Business Interruption: Is Your Business Prepared?

Power outages can create serious disruption for Australian businesses.

For some businesses, losing power for even a few hours can mean lost sales, spoiled stock, cancelled bookings, missed deadlines, staff downtime and unhappy customers. For others, a major outage caused by storms, floods, cyclones, bushfires or damage to the electricity network can stop trading for days.

In January 2025, severe storms across New South Wales caused widespread outages, with power restored to around 300,000 homes, businesses and other properties after two waves of damaging weather. The storms brought down trees and powerlines, damaged energy infrastructure and left some customers waiting several days for repairs. The NSW Government’s update on repairing damage and restoring power provides more information about the scale of the event.

Ex-Tropical Cyclone Alfred created another reminder for businesses across South East Queensland and Northern NSW. At the peak of the event, more than 300,000 properties across both states were without power, and days later tens of thousands of homes and businesses were still affected. ABC News reported on the continuing power outages following Ex-Tropical Cyclone Alfred.

For business owners, the key question is simple: if the power went out tomorrow, how long could your business continue to operate?

Why Power Outages Are a Business Risk

Most businesses rely on electricity in more ways than they realise. Power is needed for lighting, security systems, phones, internet, computers, point-of-sale systems, payment terminals, booking platforms, machinery, refrigeration, air conditioning and access systems.

A café may lose refrigerated food and be unable to process card payments. A medical practice may need to cancel appointments if systems, lighting or equipment are unavailable. A manufacturer may lose production time. A retailer may be unable to trade if the store has no lighting, no EFTPOS and no access to stock systems. A professional services firm may lose access to files, phones, emails and client records.

The impact depends on the type of business, the length of the outage and whether there is a plan in place. A short outage may be manageable. A prolonged outage can quickly affect income, customers, staff and cash flow.

A regular review of your business and commercial risk insurance can help identify how property damage, equipment failure and interruptions to trading may affect your current cover.

Business Interruption Is Often the Bigger Problem

When business owners think about insurance, they often focus on physical damage. That might include a damaged building, broken equipment, ruined stock or storm damage to the premises.

However, after a major event, the interruption to income can sometimes be just as damaging as the physical damage itself. A business may still need to pay rent, wages, loan repayments, supplier invoices and other fixed costs, even if it cannot trade normally.

Business interruption insurance may help cover loss of income after certain insured events, depending on the policy. It may also help with additional costs needed to keep the business operating or recover more quickly.

This is where policy wording becomes very important. A general power outage may not automatically be covered. In many cases, business interruption cover needs to be triggered by insured property damage or by a specific policy extension. Some policies may include limited cover for interruption to public utilities, prevention of access or damage at supplier premises, while others may not.

That is why business owners should not assume they are covered. The cause of the outage, the location of the damage, the length of the interruption and the exact policy wording can all affect whether a claim may respond.

When Might Insurance Respond to a Power Outage?

Insurance cover for power outages depends on the policy, the cause of the outage and the type of loss suffered.

For example, a business may have cover if a storm damages the insured premises and the business cannot trade while repairs are completed. A policy may also respond if an insured event damages equipment, stock or electrical systems.

Some policies may include additional extensions for public utilities or prevention of access, but these often come with limits, waiting periods and specific conditions.

Food, hospitality, medical, agricultural and retail businesses should pay particular attention to spoilage cover. If refrigeration stops during an outage, stock can quickly become unusable. Whether that loss is covered depends on the cause of the power failure, the wording of the policy, any sub-limits and whether the business has met any required conditions.

The same applies to equipment breakdown or machinery breakdown cover. Power outages, surges or electrical issues can affect refrigeration units, pumps, compressors, computers, servers, security systems, kitchen equipment and other critical machinery.

Some damage may be covered under specific sections of a business insurance policy, while other losses may be excluded.

A broker can help explain how these sections work together and where gaps may exist.

Businesses Most Exposed to Power Outages

Almost any business can be affected by a power outage, but some businesses are more vulnerable than others.

Hospitality businesses, supermarkets, butchers, bakeries, seafood retailers and cold storage operators may face immediate stock losses if refrigeration fails.

Accommodation providers may need to manage guest safety, lighting, access and communication issues. Medical, dental and allied health practices may need to cancel appointments or protect temperature-sensitive supplies.

Manufacturers, workshops and rural businesses may lose production time if machinery, pumps or equipment stop working. Service stations may be unable to operate pumps or payment systems.

Online retailers and professional services firms may be affected if they lose access to internet, cloud systems, phones or customer records. Businesses that rely heavily on digital systems may also need to consider whether their cyber protection insurance is suitable for interruptions caused by cyber incidents, rather than physical electricity failures.

For these businesses, a power outage is not just an operational inconvenience. It can become a financial issue very quickly.

Business Continuity Planning for Power Outages

Insurance is important, but it should sit alongside a practical business continuity plan.

Business Queensland’s guidance on business continuity planning explains that a continuity plan sets out how a business will keep operating during and after a disaster or emergency.

Businesses should prepare for emergencies that are most likely to occur and have the greatest potential impact, including loss of power, infrastructure disruption and transport disruption. Business Queensland also provides resources for preparing a business for an emergency.

For a power outage, a continuity plan should identify the systems and equipment that are essential to the business. It should also set out:

  • Who needs to be contacted
  • How staff will communicate
  • How customers will be updated
  • What can be done manually if digital systems are unavailable
  • Which services must be restored first
  • How critical stock and equipment will be protected

Some businesses may also need to consider backup power. Portable generators, fixed standby generators, battery backup systems, uninterruptible power supply units and backup internet connections can all be useful, but they need to be properly installed, tested and used safely.

A backup power plan should be practical. It should consider what equipment needs to keep running, how long backup power is required, who is trained to operate it and whether fuel, ventilation and electrical safety have been properly managed.

Get Ready Queensland’s business preparedness resources provide further guidance for protecting businesses from severe weather and other disruptions.

What to Do During a Power Outage

During a power outage, safety should come first.

A business owner should check that staff and customers are safe, turn off sensitive equipment where appropriate and avoid unsafe generator use.

If refrigeration is affected, food safety rules and temperature records may become important. If the outage is connected to storm, flood, fire or another insured event, it is useful to keep:

  • Photos and videos of damage
  • Electricity distributor outage records
  • Stock and inventory records
  • Temperature logs
  • Sales and trading records
  • Receipts for emergency costs
  • Records of equipment damage
  • Communications with customers and suppliers

It is also important to contact the electricity distributor for outage updates and communicate clearly with customers if trading is affected.

If there may be an insurance claim, contact your broker or insurer early and keep records of lost stock, lost trading time and recovery expenses.

Westlawn’s claims management team can assist clients with documenting, lodging and managing an insurance claim.

What to Ask Your Insurance Broker

A power outage is a good example of why business insurance should be reviewed properly, not just renewed each year without discussion.

Business owners should ask whether their policy includes business interruption insurance and what events can trigger it.

They should also check whether the policy includes any cover for:

  • Failure of public utilities
  • Spoilage of refrigerated goods
  • Equipment breakdown
  • Machinery breakdown
  • Electrical or power surge damage
  • Prevention of access
  • Damage at supplier premises
  • Additional recovery expenses
  • Temporary premises or equipment hire

Businesses that own or lease premises should also review their commercial property insurance to understand how buildings, contents, stock and other physical assets may be covered following an insured event.

The indemnity period also matters. If a business could take months to fully recover after a major event, a short indemnity period may not be enough.

Revenue, gross profit and wage figures should also be reviewed regularly so the business is not underinsured.

Power Outage Preparedness Checklist

As a starting point, business owners can ask:

  • Could we keep trading if the power went out for several hours?
  • What would happen if the outage lasted several days?
  • Which systems, equipment or stock are most at risk?
  • Do we have backup power for critical equipment?
  • Can we communicate with staff and customers if phones or internet are down?
  • Can we process payments if EFTPOS is unavailable?
  • Are data backups current and accessible?
  • Do we have a plan for refrigerated or temperature-sensitive stock?
  • Are outage records, temperature logs and stock records maintained where needed?
  • Does our policy include business interruption cover?
  • Does our policy include spoilage, equipment breakdown or public utilities cover?
  • Do we understand the waiting periods, limits and exclusions?
  • Are our buildings, contents and stock insured for appropriate values?
  • Do we know who to contact if we need to make a claim?

If several of these answers are unclear, it may be time to review both your continuity plan and your insurance cover.

Talk to Westlawn Insurance Brokers

A power outage can affect sales, stock, systems, staff, customers and cash flow. The disruption can be even greater when the outage is caused by a storm, flood, cyclone-related weather event, fire or infrastructure damage.

Westlawn Insurance Brokers can help business owners review whether their current insurance is suitable for risks such as:

Westlawn Insurance Brokers supports businesses across Grafton, Casino, Lismore, Robina, Coffs Harbour, Ballina, Walcha and surrounding areas.

To speak with a Westlawn Insurance broker, contact the team today.

Call: 1300 937 852
Email: insurance@westlawn.com.au

General advice only. This article does not take into account your personal circumstances, objectives or needs. Cover is subject to the terms, conditions, limits and exclusions of the relevant policy. You should review the relevant Product Disclosure Statement and Target Market Determination and speak with a qualified insurance professional before making decisions about insurance.