Losses due to wind turbine fires can cost $7-8 million, which could be crippling to pay for without insurance. Wind turbine insurance is important to ensure that producing wind energy remains profitable for owners and operators.

However, many insureds are surprised by their insurance policy terms when they have a loss. Below we discuss common misconceptions you may have about your wind turbine insurance policy to be better prepared when an event occurs.

1. "Insurance will cover me for everything"

Insurance exists for sudden and unforeseen losses. If insurers did, in fact, pay for everything, it would likely cause insureds to have higher deductibles and premiums.

In the event of a fire, which occurs in 1 in 100 turbines over their 20-year lifespan, your insurance policy will likely only cover the permanent works of the site, the physical loss/damage, and revenue lost on the turbine that caught fire.

You may be surprised when your policy does not cover annual energy production, other assets, and your reputation.

2. Payouts on claims don’t happen overnight

According to Jatin Sharma, Managing Partner at NARDAC, it’s not “I’ve had a turbine fire, and please indemnify me for ‘X’ amount of money.” Underwriters and claims managers will want to perform a root cause analysis to determine the true cause of the fire. They may also want to talk to the wind turbine OEM as part of this investigation.

3. Costs of shutting down your wind farm for an investigation may not be covered

Further, if you must shut down your wind farm for an investigation, those additional costs are not covered by insurance because the other turbines were not damaged by fire. Depending on the size of your wind farm and how many turbines have to be shut down, this cost can be substantial.

4. The replacement cost per unit is 30-50% higher than the initial cost

The cost of replacing turbine components may shock you when you compare it to the bulk order cost you paid initially. According to Jatin Sharma, turbine replacement costs are “30-50% higher without the bulk discount.” Considering wind turbines can cost $3+ million, the cost of replacement would be over $4 million, costing you an extra $1 million. Your insurance policy probably only covers the initial cost you paid for the turbine, so you would have to cover the extra $1 million.

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