Can Natural Disasters hurt your small business?

Here are 5 Natural Disasters that can wreak havoc on your Small Business.

 

With the presence of hurricane season upon us and the two examples we have in Hurricanes Harvey and Irma, now is a good time to have a conversation with your insurance agent about just what risks your small business faces when it comes to natural disasters. The risks are going to be different depending upon where your business operates, but now is as good of a time as ever to determine what risks you face and what coverages you may or may not need. Here are 5 types of disasters every business should prepare itself for.

Key West is one area that frequently gets hit by hurricanes. Small businesses in this area have a knack for dealing with natural disasters.

Hurricanes

Obviously, if you live in the Midwest, you may not need coverage to protect your business from a hurricane.  But the effects of a hurricane can travel very far inland, depending upon the strength of the storm. The states of Tennessee and Kentucky do not have a coast line, but they are feeling the effects of Hurricane Harvey at this very moment.  If you live in a coastal community, it is important to find out what exactly your hurricane policy does and does not cover. You may need an additional flood policy to deal with storm surge and flooding that comes after the tornado.  A short conversation with your agent should help you determine what all policies you need.

Tornadoes

Tornadoes are a type of natural disaster that can reach far and wide. They are not isolated just to the Midwest. Tornadoes can impact a small area of one small town or they can damage many areas through a state or region. Predicting them is difficult and the only true way to protect your business is to have the proper insurance coverage in place. Tornadoes are another type of disaster that also have a need for flood insurance.

Forest Fires are one type of Natural Disaster. Fires

Fires can come in the form of forest fires or local fires due to man-made causes. Certain areas in the Western United States are more prone to fires because of the dry nature of the climate in this part of the country. Forest fires can damage wet areas too as was seen last fall when many areas in Tennessee and North Carolina were ravaged by forest fires near Gatlinburg, TN and the Great Smoky Mountains National Park.

Earthquakes

Earthquakes are areas that are little more predictable to know if you need the coverage or not. Areas that are on or near a fault line are more likely to need this coverage. Some faults are more likely than others and carry more risks. Also, with the growing popularity of fracking technology to dig for oil in some areas of the country, earthquakes are now appearing much more frequently and in areas that are not near a fault line. If this type of technology is being used in your area, it is something you should speak with your insurance agent about in order to properly protect your business.

Fllods are another type of natural disaster that can have a negative impact on small businesses. Floods

Floods are another type of natural disaster that should be prepared for. In most communities, if you live in or near a flood zone you are required to carry coverage.  These are not the only businesses who would be wise to purchase this coverage. The damage from floods can be far-reaching and in many cases it can cause a business to close its doors permanently.

Flood Insurance

Flood Insurance

Anywhere it rains, it can flood.  Most of us, when we hear the word “flood” think of overflowing rivers. But for most homeowners, a flood following a heavy rainfall is more along the lines of water spilling in through a window well or coming in through a lower-floor door.  This can cause very much a grey area when it comes to flood insurance.

Flooding is the #1 natural hazard in the US. Even an inch of water can cause thousands of dollars in damage.

The situations that cause flooding—heavy rain, groundwater, or new development —can happen anywhere. In fact, one in five flood insurance claims comes from someone in a low- or medium-risk area. This is why, for many homeowners, flood insurance is an essential layer of protection. Adding flood insurance to your home-insurance package means you’re covered if a water main ruptures or a swimming pool collapses, and your home floods – situations not usually covered by standard policies.

That’s right, most basic homeowner policies don’t protect against flood damage. Neither do most business-owner policies. Only flood insurance can cover damage caused by a water accumulating in your subdivision or a drain burst.

FEMA

FEMA, the Federal Emergency Management Agency, recommends flood insurance to everyone. “There are still millions of Americans at significant risk of a flood damaging or destroying their homes. To protect against flooding and its consequences, all at-risk homeowners need to buy and maintain a flood-insurance policy.”

As you can imagine, there are rules and restrictions. For example, damage caused by moisture, mildew or mold may not be covered. Damage to your basement’s contents may not be covered. Especially susceptible things like fire arms or currency may not be covered. The good news is, those coverages are available. The cost of premiums vary based on the amount of coverage you need, what’s covered and your property’s risk. Check with us to find out more.

If you decide to purchase flood insurance, a federal flood policy would cover rebuilding costs up to $250,000. You can also get a NFIP (National Flood Insurance Program) policy to cover up to $100,000 in possessions. If your home would cost more than $250,000 to rebuild, you need private flood insurance called excess coverage.

Consider purchasing flood coverage sooner rather than later. Keep in mind there’s often a 30-day wait after purchase for a policy to take effect. So call me today about flood insurance. It’s rainy day protection that could help save your most valuable investment: your home or business.

Q&A with Tim Davis

Q&A with Insurance Expert Tim Davis

 

What are the most significant Weather Related Risks for Small Businesses?

 

What’s the biggest mistake small business owners make when it comes to safeguarding their businesses from weather-related interruptions and why is that a problem?

The biggest mistake small business owners make is failing to buy business interruption coverage. This coverage is not a stand-alone policy, but is typically included on a business owners’ package (or BOP) policy. The Hartford has some of the best coverage available on their business interruption coverage as a part of their BOP policy, but several other carriers offer great coverage as well.

How can we know if we need flood insurance in addition to business interruption coverage?

Flood insurance will not only provide coverage to replace the damage to your building, but the business interruption coverage won’t respond for flood-related losses if you don’t have flood insurance in place.

What’s a common misconception about business insurance related to weather issues and what’s the truth? 

As highlighted above, business interruption coverage won’t apply to all weather-related issues. Whatever peril (or risk) caused the business interruption must be a covered peril on the BOP policy. If an earthquake caused the damage and interrupted your business, but you didn’t have earthquake coverage on your policy, then coverage for the earthquake damage wouldn’t exist.

Another common myth centers around off-premises power failure. If a weather-related event causes power to fail at a location away from your business (like a blackout or a transformer a mile away gets struck by lightning) … business interruption coverage won’t apply. With most policies, the weather-related cause of the power failure must happen at your business.

Do we need special coverage to protect from wildfires, or will traditional property & casualty cover us? Why or why not? 

A wild fire would be a covered cause of loss on many commercial property policies, but it is not guaranteed.  I would recommend reading over your policy – identify covered causes of loss as well as exclusions in the policy.

What kind of protection do we need related to employees and customers who might be injured on our premises during a weather event?

Your standard workers compensation insurance (for employees) and general liability insurance (for your customers) policies should suffice. These two policies should be enough to protect your business from incidents that occur on your premises.

What documents should we be sure to store safely to make the claims process go faster after a weather disaster strikes? Please describe each document and why it’s important.

Financial records will be the most helpful piece of information to provide to simplify the claims process. Carriers will evaluate the income losses your company sustained based off the company’s past sales history and reasonable projections of your company’s profits and losses for the time your company suffered from the weather-related interruption.  Policy information – including agent and carrier contact information.  Also, it is good to take pictures of the equipment in a building – including serial numbers.  This helps with replacement parts and valuation.

What phone numbers should we keep on hand in the event of a weather emergency and why? 

Make sure you have either your insurance agent’s number on hand, or (even better) the claims reporting phone number for the insurance carrier on your business owners’ package policy.  I would also consider having phone numbers for emergency response/clean up companies.  In the event of a major weather event, it is smart to have a few companies to choose from – maybe even consider a company from a neighboring community so that they are less likely to be impacted by the same weather event.

What’s the first thing we should do if our business is impacted by a weather event and why? 

Life safety is the very first concern – make sure that all employees and guests at your premises are accounted for and safe.  Then, secure your building and business personal property.   If you can help prevent further damage by taking additional steps, those extra expenses can be covered in some policies.

What else should small business owners know about preparing for and responding to a weather disaster? 

A proper BOP policy with business interruption coverage will provide a real sense of relief in the aftermath of a disaster. Loss of business income is the #1 reason that most businesses do not open after a serious loss. This coverage will help provide coverage for the actual income loss sustained; the net income (net profit or loss before income taxes) that would have been earned over that period; and provides costs for things like payroll so you can keep your employees while your company rebuilds.  Be prepared – think ahead – develop a contingency plan.  If something happens, have a plan already in place and make sure that everyone in the business is aware of what steps to take.

What other questions should I ask my agent about this coverage?

Check the time period you have for extended business income. Thirty days is standard coverage, but some carriers can offer up to 12 months by endorsement. Also ask your agent if you need contingent business interruption coverage — this pays out when your company is unable to operate because of an event like a natural disaster that damages the business of one of your suppliers or customers, which causes your company to lose income.