DISCLAIMER: This is only a brief overview of general coverage issues. Actual coverage is determined by the coverage terms, definitions, and exclusions in each individual insurance policy.
Weather Disaster Insurance Information
Three Items to Review
If you want to feel a bit more secure about your store as it pertains to dealing with a potential disaster, take a look at your weather disaster insurance policies and check these items:
- policy limits
- deductibles (including any special deductibles for wind or hail)
- & exclusions
Decide if you can live with the weather disaster insurance coverage you have.
Let’s start with limits. Insure your building and personal property for replacement cost. If your limits are too low, you will be out-of-pocket on a loss. A few dollars in premiums can get those limits up, and save you thousands in the long run.
Regarding weather disaster insurance deductibles, you may think you will save a great deal of money by increasing your deductible, but that is not always the case. Of course, explore this with your agent, but don’t be surprised if the savings aren’t what you had anticipated.
Remember, with wind/hail deductibles, the percentage applies to the limits, not the loss. So, for example, with a 5% wind/hail deductible, if you have a $100,000 wind/hail loss on your $500,000 building, your deductible will be $25,000, not $5,000. Many people do not realize this until after the loss.
What should I do about weather disaster insurance exclusions?
Regarding exclusions, read them over so you know what property and what perils are not covered. If you have any questions, call your agent. If you want coverage that is excluded, ask your agent to supply a quote. You will discover that many exclusions can be covered for an additional premium, and sometimes that additional premium is not as expensive as you might think.
If you’re looking for an example of exclusions, consider a fence around your business. Did you know that fences are not covered? However, you can add them to your coverage for a small, additional premium.
Loss of Business
If you feel a bit lost when it comes to understanding insurance matters, you’re not alone. There are some items of coverage that most business owners just don’t think about. For example, most of you have loss-of-business income, but that only applies when there is a direct physical loss at your location. When you are out of business due to power failure from a storm, you need a coverage known as utility services-time element.
If you’re a store owner in a coastal area, you are probably aware of utility services-time element coverage due to the probability of hurricanes. After a major hurricane, a city may be without power for weeks.
Utility services-time element coverage is an extension of your loss-of-business income due to damage that occurs away from your premises, like downed power lines or a damaged water supply. Again, this coverage is usually not that expensive, but it’s important not just in coastal areas, but in any area due to the variety of weather events that may occur.
Things may not improve when the power returns.
You may turn your washers and dryers on and discover that some of them are not working. The equipment may be damaged by a power surge. To deal with this problem, you should carry utility services-direct damage coverage, which pays to repair equipment that has been damaged due to a loss that occurred away from your premises. This coverage is not expensive, and I believe it’s worth the investment.
Flood is an exclusion on virtually all commercial insurance policies. Flood coverage for building and personal property can be purchased through the National Flood Insurance Program. If you are near a body of water that could flood, ask your agent to get you a flood quote.
Earthquake is another exclusion, but it can be purchased from most insurance carriers. If you are concerned, simply call your agent and you should be able to get a price for earthquake coverage.
Think about your customers in these situations.
If you have a true bailee policy, and not just personal property of others, the clothing in your laundry is covered for flood and earthquake. If you are doing drop-off service or farming out dry-cleaning, you should have bailee coverage included in your insurance package and not just personal property of others.
Bailee also covers the clothing when it is away from your premises, such as when it is being transported to the drycleaner you are partnered with. Personal property of others is only covered at your premises.
Most of you are probably aware of Mark Twain’s famous saying, “Everyone talks about the weather, but no one does anything about it.”
That may be true, but if you give your insurance situation some thought and are prepared, you reduce the odds of weather getting the best of you.