Now is time to review commercial storm coverage
The start of hurricane season this week has most of Southwest Florida thinking about protecting their homes and personal property from damage. However, for business owners the devastation can be two-fold if their their source of income takes a sudden drop or even disappears due to a landfall or sideswipe from a storm.
One way business owners can protect themselves is with adequate insurance coverage to replace lost time, inventory and income, but in an ever-changing economy it may be difficult to know how much is enough and if the coverage is right for their particular business.
David Kennedy, a commercial lines producer at Olin Hills and Associates in Cape Coral, suggest a full review of coverage and deductibles before hurricane season gets into full-swing.
“A business should review commercial property insurance now instead of waiting until a storm is churning,” he said.
First and foremost, he said, a businesses owner needs to determine if the commercial property insurance they have covers wind and hail damage.
“If not, this would be clearly noted in the policy paperwork,” he said.
Furthermore, he said, if the business owns the building the replacement cost of the building must be determined and coverage reviewed to see if it is enough to cover the dollar amount of extensive repairs or even replacing the building.
Kennedy suggests having regular appraisals to make sure the indemnity amount is satisfactory to cover any cost the owner is unwilling or unable to pay out of pocket.
If leasing the building, he said, the lessee should review the lease agreement to determine if the contract requires additional coverage for improvements made to the building by the tenant.
Thoroughly understanding your policy is imperative, Kennedy said, especially the finer details, such as the deductible.
“A lot of people learned this the hard way after (Hurricane) Charley,” he said.
Kennedy said the deducible percentage of most damage policies applies to the full value of the property and not, as many assume, to the dollar amount of the damage.
“For example, if the insured value of the building is $1 million and you have $20,000 worth of damage, if your deductible is five percent your responsibility is for 5 percent of $1 million, not the $20,000 damage,” he said.
It’s also important to realize that water damage caused by storm surge, although caused by wind, isn’t covered by most storm protection policies according to Dilman Thomas, vice president, of Oslwald Trippe and Company, one of Southwest Florida’s largest commercial insurers.
“As we saw when Katrina hit New Orleans, it was the water that did most of the damage,” he said. “When we had Charley and Ft. Myers Beach was closed down, it was mostly water damage, not the wind that was the cause.”
Thomas said rising water cause by storm surge is considered a flood event and won’t be covered by most property damage insurance. Therefore, he said, it’s important to secure flood insurance as well.
“And you can’t wait until a storm is coming,” he said. “The difficulty with flood insurance is that, in most cases, there is a 30-day waiting period before it goes into effect.”
However, as any business owner knows, the brick and mortar aspect of their business is only a part of a much bigger picture.
“They would also need to look at the cost of replacing personal property such as equipment and furnishings,” Kennedy said.
Employee salaries, recurring operating expenses and other bills still need to be paid even after a storm strikes, but proper planning and adequate insurance coverage can keep a business up and running in the aftermath of a hurricane or other catastrophic event that cause and operation to fold due to loss of sales or the inability function as a going concern.
“Loss of income can be huge,” he said. “But the right coverage can help a business survive.”
In addition to simply reviewing insurance coverage, proprietors can take steps before a storm to help mitigate damage and help them get back in business as soon as possible.
Getting computers, servers and other electronics off the floor and wrapped in plastic can offer some protection but, particularly for a sales-based business, inventory replacement costs can be devastating.
Kennedy recommends making sure product counts are up to date prior to a storm and keeping concise inventory records.
“If you do have to evacuate make sure you take photographs or a video of your inventory and a copy of your policy,” he said.
Despite the best preparations, Thomas said, the days and weeks following a storm can be as stressful as landfall.
If coverage isn’t up to date, doesn’t provide adequate protection or isn’t thoroughly understood by the policyholder, the situation may only get worse in the aftermath.
For example, determining if damage was caused by wind or water can be difficult, Thomas said.
“If the building is still standing, you can usually tell how far the water rose because it will leave a make on the wall. If the building is gone, it’s hard to know if the building was flooded or blown away,” he said.
Both Thomas and Kennedy agree that reviewing coverage sooner rather than later is the best way to protect your business and your income.