Insurance coverage is a must for businesses that hope to survive the impact of storms, fires, and other dramatic, unexpected events. There are certain types of occurrences for which you may think you’re covered, but on closer examination find you’re lacking. Or, even if covered, the extent may not be sufficient. Think about the small businesses in East Palestine, Ohio, who were shut down when the train carrying toxic chemicals derailed there on February 3, 2023. Residents were evacuated and told not to return until February 8, 5 days later—when businesses also began to reopen. But small businesses suffered considerable losses. Here are some situations in which you may not have the coverage you think you have now and what to do about it.
Consider these situations for insurance coverage
If there’s a storm, a flood, or other incident—like a train derailment—in your area that shuts you down for more than a just a day or two—perhaps a road has been washed away and you have no access to your facility—how are you going to continue to pay the rent, wages to employees who live paycheck to paycheck, and other monthly bills? What about missed income opportunities? And what happens if your suppliers shut down due to a casualty event?
Coverage to check: Think about obtaining business interruption or continuation coverage to pay operating costs (e.g., rent, utilities, and wages to employees) during the period your business was forced to close. This coverage can be added to a business owners policy (BOP) or obtained separately as part of a business insurance package. Find more information about business interruption coverage from InsureU.
You may also want to consider coverage for lost profits. Loss of income insurance can also be added to an existing business policy. Another type of endorsement (addition) to a business policy can be for dependent property coverage. This protects you if you rely on other businesses to supply you with goods and services and they’re forced to close; the coverage pays for losses due to a decline in business.
Riots and terrorist events
Unfortunately, today riots, civil commotions, looting, and vandalism are all too common. As a general rule, most business policies cover these events (look for named perils in the fine print). However, there may be limits or exclusions for these events that do not apply to ordinary incidents, such as a fire.
Coverage to check: Review the extent of the coverage you have now. It may have limits below your current needs. It may exclude certain reimbursements, such as for plate glass windows broken during a riot or through vandalism, but such coverage can be separately added to a policy.
Again, consider adding business interruption and loss of income coverage resulting from these events.
Caution: Submitting claims for losses occasioned by these events may be covered, but the insurer may not renew coverage when the policy expires. Weigh carefully shouldering the cost of a loss from a particular event without reimbursement versus continued coverage in the future.
Today, the majority of small businesses operate from a home office. Don’t assume your homeowner’s or renter’s policy will cover you. It may provide no coverage for injuries to business visitors (e.g., a client who falls while seeing you in your home office). It may have only limited coverage for your business equipment (e.g., computer, etc.) and no coverage for inventory stored at your home.
What to check: Review your insurance needs so you can get the coverage that’s appropriate to your situation. This may be as simple as adding a rider to your existing personal policy or obtaining a separate BOP.
It’s a rule of thumb in the insurance industry that if water comes through the roof, say because of hurricane that blew off the roof, it’s covered by your basic BOP. The same is true for property damage that results from a broken pipe inside the facility. But if the water comes in under the door, it’s considered flooding and a BOP likely won’t provide coverage for property damage that results.
What to check: Determine whether your existing policy will cover sewer backup, water main breaks, and other water damage initiated outside of your facility. Can or should you obtain separate flood insurance? Flood insurance usually can’t be added to an existing business policy but can be obtained through a business insurer, such as The Hartford. They get the coverage for you through the National Flood Insurance Program.
Don’t automatically renew your business insurance annually without doing a review. Consider your needs, which may have changed year over year. Also review your budget to see what extra coverage you can afford to carry. Work with an knowledgeable insurance professional to maximize your protection at the best rates possible.
Also, find additional information and resources mentioned in an earlier blog.