How the coverage is triggered
Most business interruption coverage responds only after direct physical damage to insured property from a covered peril. That means an outage caused by a power grid failure far from the site, or by a software fault, may fall outside it unless the policy includes extensions for utility service interruption or for non physical triggers. Knowing exactly what sets off coverage is the first thing to check.
Waiting periods and indemnity periods
The waiting period is the amount of time, often expressed in hours or days, that the outage must last before the policy begins to pay. For a facility whose customers expect continuous service, even a short waiting period can leave a meaningful uninsured loss. The indemnity period is how long the policy will pay after the loss. Rebuilding specialized infrastructure can take many months because of equipment lead times, so a short indemnity period can run out before operations are restored.
Uptime Institute's 2026 outage analysis found that 57 percent of major data center outages cost more than 100,000 dollars and about one in five exceeded one million, so the numbers involved are not small.
Contracts, credits and customers
A colocation or cloud operator usually owes customers service level credits or refunds when uptime commitments are missed. Whether those payments are part of an insured loss depends on the form, and on how revenue is defined in the policy. Review how your customer contracts translate into dollars of lost income, and make sure the policy's definition of revenue captures them.
Extensions worth discussing
Several extensions are specifically relevant to this industry, and each has its own limit and conditions.
- Utility service interruption for loss of power, water or telecommunications off premises.
- Dependent property coverage for losses at a key supplier or customer location.
- Extra expense to cover the cost of moving workloads or renting temporary capacity.
- Extended period of indemnity to cover the ramp back to normal revenue.
Last updated October 22, 2026. Written by the Alton Risk placement team.