Commercial Earthquake Insurance

When you think about earthquakes in the United States, most people think about California. But earthquakes happen in many other states.

The worst quake in the country was the 1964 Alaskan Earthquake. The first of the New Madrid earthquakes in 1811 were centered just north of Memphis. The first one was so strong, it changed the course of the Mississippi, rang church bells in Boston and woke President and Dolley Madison up in the White House.

Montana, Oregon, Hawaii, and Idaho all had earthquakes in the top 25. Last month, there was an earthquake centered in Millinocket, a small town in northern Maine.

The point here is that everyone needs to look into earthquake insurance.

Premiums and deductibles for earthquake insurance vary wildly from state to state, based on the likelihood and average intensity of quakes.

So, here are the things you need to look at and discuss with your licensed insurance professional:

  • Will your insurance pay actual replacement value or market value of your belongings or your house if it is destroyed?
  • Will your insurance pay for living expenses such as hotel and restaurants if your house is too damaged for you to stay in?
  • Do you need just your home covered? Or are there outbuildings such as sheds, workshops, or garages which should be covered as well?
  • Are there limits or exclusions on the policy?

Californians are unique in that they buy their earthquake insurance, whether homeowners or renters, through a public-private partnership called the California Earthquake Authority through a handful of insurance companies. The standard earthquake coverage has a deductible of between 10% and 15%.

Everyone else need only discuss their needs with an insurance professional to see what it is they need to cover.

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Avoid a Flood of Woes

You might think, if your business is inland, that you are safe from flood damage. In the words of the late Johnny Carson, “Au contraire!”

Ice jamming is caused when a stream or river becomes clogged with ice, causing a backup and eventual overflow

Snowmelt occurs when frozen ground becomes saturated and fails to absorb the excess water.

Flash floods happen during and after heavy rain.

Mudslides affect hills and mountainsides after heavy or prolonged rain.

Storm surges, particularly in areas which experience hurricanes, are responsible for all sorts of flood damage.

Construction or lack of proper infrastructure which may cause land or streets to have trouble draining.

As a matter of fact, more than 80% of all natural disasters declared by the federal government involve flooding. The average commercial flood claim in the past decade has been approximately $33,000, and at least a quarter of all businesses which close after disaster events close and never re-open.

General insurance policies don’t cover flood damage, so it doesn’t take a rocket scientist to realize that it is always a good idea to at least consider flood insurance!

All commercial flood insurance agents are accountable to the National Flood Insurance Program, which is backed by the federal government and sold by private insurers.

More often than not, there is a 30-day waiting period between the day you buy your policy and the day it goes into effect, so the time to talk to your licensed insurance professional is sooner, rather than later.

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Business Interruption Insurance

Business interruption insurance should be the foundation of your disaster plan.

Every month of every year, business owners face numerous natural disasters in every part of the country.  Blizzards and ice storms, tornadoes and hurricanes, fires and flooding put hundreds of thousands of small businesses at risk. Look at hurricane Katrina, tens of thousands of businesses destroyed and over 125,000 reported jobs lost.

Yet, nearly 70 percent of all business owners admit to having no disaster plan in place for their business.

Going through a disaster is bad enough, having your business survive and recover is greatly improved with a plan in place.  The time to create a disaster plan for your business is before, not after an incident. Taking the time to plan now can pay you back ten fold or more should disaster strike.

You must do a risk assessment for your business.  What potential types of emergencies could your business face?  Your insurance carrier, the American Red Cross, and your state department of insurance can all provide you with information.

Develop a contingency plan which includes operations, employee safety and notification, and what steps to take.  Identify the key areas for your business to survive and how you can perform those functions as quickly as possible.  Identify a remote location if necessary and supplier alternatives.  Set up a call plan or call tree for your employees.

Ensure you have remote access to your computer network and back up and store data daily.

Last, make sure you have business interruption insurance in place.  Typical coverage includes loss of revenue, profits, and fixed operating costs.  It should cover temporary operating location including expenses to set up the location.  It may offer additional temporary expense coverage that is reasonable and necessary while your business is being repaired or rebuilt.

Ask your agent for help in determining the proper policy and coverage for your business.

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Property Insurance and Natural Disasters

My small business property insurance covers a natural disaster, right?

In today’s small business insurance market, it is possible to get some disaster coverage in your small business property insurance coverage.  However, as a business owner, it is up to you to understand what is covered and what’s not.  In many cases, certain disasters and types of storm damage are not covered.

Your property insurance covers property from the every day risks for things like theft or damage from an accident.  Disaster insurance will cover the immediate loss and impact to your business and property from a specific occurrence like a flood.

As noted above, it is now possible to add coverage to your existing policy for specific disasters like flood, earthquakes, and acts of terrorism.  It is important to review your present coverage and look for any specific exclusion written into your existing business property policy.

Depending on where your business is located and what types of natural disasters may occur will generally help you understand any exclusion in your property coverage and gaps you may need to fill with a separate policy.

Typically, disaster coverage deductibles are a percentage of the loss unlike your business property coverage which will have a set deductible.  Depending on the amount of the loss, that can be a significant number.  Work with your licensed insurance professional to determine what risk exposure your business has, and how to best manage the risk with a combination of business insurance and separate disaster coverage.

Don’t be afraid to ask questions and get a clear understanding of how your coverage will work in the event it is needed.  If you have business interruption insurance or mechanical breakdown, review that coverage and any exclusion as well.

Talking with your licensed insurance professional is important before determining what coverage is necessary and how it works in conjunction with your existing property insurance.  What you are trying to accomplish is a combination of coverage and policies which reduces your risk and doesn’t duplicate coverage.  You want your premium dollars working for you for the maximum coverage.

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Natural Disaster Insurance for Business

Do in need disaster insurance for my business?

Many business owners — and homeowners for that matter — think that their property insurance is all inclusive and covers anything that could happen. It may, or it may not, depending on the policy specifics and exclusions it has written into it. It’s up to you as a business owner to know where your business coverage and risk lie.

The difference between natural disaster insurance and property insurance is that natural disaster insurance is specific and specialized and covers against immediate events where property insurance covers against a variety of risks including theft and accidental incidents.

That being said, the insurance industry, like many other industries, has evolved and may offer a wide variety of risks included in your property insurance policy for your business.

With some many options available to the business owner, it is important to do a risk assessment for your business. Don’t make the mistake of many and assume your business is covered for a flood only to find out when calling to make a claim it isn’t. Don’t assume the protection isn’t in place and purchase a policy with lots of double coverage as well by failing to read the policy and reviewing questions with your licensed professional.

What needs to be done is getting with your licensed insurance professional, digging into the fine print, and coming up with a reasonable plan to cover risk.

In addition to natural disaster, do you need cover for an act of terrorism? Are you in a geographic area that may warrant such coverage? Flood, tornado, and hurricane the same rationale applies. After Katrina, natural disaster insurance is becoming harder to find and much more expensive. Utilize the expertise of your licensed insurance professional to guide you to minimize the exposure while keeping your coverage affordable.

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