Think You Have Insurance, Think Again – Is Your Business Insurance Leaving You Vulnerable Against Natural Disasters?

If you think your standard business insurance policy is going to protect your investment from all types of natural disasters, then you stumbled upon the right post. 

In the next 5 to 7 minutes (depending on your reading speed), we will reveal why some business insurance policies leave businesses dangerously vulnerable against certain natural disasters. More importantly, we will reveal how you can check if you have the right policy to tackle the financial storm following an actual natural disaster. Therefore, the next time you are checking small business insurance quotes you can take the learning into consideration and pick a policy that provides comprehensive protection against all natural disasters. 

How Natural Disasters Affect Your Business? 

Natural disasters have two very devastating effects on any brick and mortar business. 

The first and the most obvious is the property damage it causes as a direct result. Depending on the type of insurance policy your business is covered with you may or may not get coverage for commercial property damage. We will talk about that in detail in the next section. 

Natural disasters can also force you to halt your business operations. Situations like flooded streets or destroyed infrastructure can leave your business without customers for months. This immediately stops the flow of revenue. Natural disasters may also cause employees to leave town and look for opportunities elsewhere. This is where business interruption insurance comes into play by compensating you for the loss of income. It promises to pay a periodic sum till your business gets back on its feet or till the coverage limit is exhausted, whichever happens first.

However, even if you do have commercial property insurance and business interruption coverage your claim may get rejected based on the type of natural disaster that has caused the damage.

Natural Disasters That Are Usually Not Covered by Standard Policies

Earthquakes: Earthquake cover is rarely provided as standard in traditional business insurance policies, especially if the location of the business is near an earthquake-prone zone. You will have to get separate earthquake insurance. Make sure the coverage limit is sufficient and the deductibles are minimum as an earthquake can destroy entire buildings, which makes rebuilding very expensive.

Floods: Floods are also not covered by standard commercial property insurance. Buy commercial flood insurance as an addon to your standard BOP (Business Owner’s Policy) to cover the cost of repairs caused by a flood.  These policies cover the damages to the building as well as equipment, furniture, and other assets owned by the business. 

Disasters That are Typically Covered

Wildfires: Typically, standard BOPs and commercial property insurance cover fire damage. However, it’s important to check if it does in the case of wildfires. 

Volcanoes: Volcanoes and damage caused by lava are usually covered. However, businesses located in high-risk areas may not get covered in the first place. Therefore, if your business is located in Hawaii and other volcano prone areas, be sure to speak to your provider. 

Tornadoes: Most standard commercial property insurance covers damages caused by wind. Therefore, typical business insurance should cover your business from the risk of tornado damage. However, tornadoes are so devastating that they can rip apart entire buildings, which means the cost of repairing and removing debris can easily exceed the limit. Therefore if you want to be truly protected, make sure the insurance coverage limit is high.

Hurricanes: Hurricanes are also covered since standard policies cover wind damage. Heavy rain and hail damage are also covered by BOPs and business property insurance. 

Why Business Interruption Insurance Coverage is Important?

Business interruption insurance kicks in from the moment your business operation is halted by a natural disaster. It covers operating expenses such as utility bills, employee salaries, loan payments, and others. Interruption policies also cover the cost of temporary relocation or renting temporary offices to resume operations. It also covers you against stoppages caused by riots, political instabilities, and other risks.  

While it’s a great idea to buy commercial property insurance that covers all natural disasters, it’s also important to back it up with a good business interruption insurance coverage. That way you will have enough money for not only repairing the damage but also sustain yourself and your employees for the time your business remains unoperational. 

Are Commercial Vehicles Covered?

No, commercial vehicles are protected by commercial vehicle insurance. Standard property insurance does not extend to vehicles. This is why it’s important to check the policy terms of your commercial vehicle insurance to check if it covers damages caused by specific natural disasters.