When Weather Becomes Your Worst Enemy
The winter of 2013–2014 was one of the costliest for U.S. businesses in decades. Insured losses from severe winter events in 2013 totaled about $1.9 billion. And in January 2014, the infamous “polar vortex” caused another $1.5 billion in losses over just a few bitterly cold days.1
Small businesses often operate on tight margins, so they can be hit especially hard when extreme weather or a more isolated event (such as a fire) results in damage and/or forces a temporary closure.
Unfortunately, one-fourth of small businesses never reopen after a major disaster.2 Companies with thoughtful disaster plans and adequate insurance protection may be in a better position to reopen their doors after the “storm” passes.
A business owner policy (BOP) is a package that typically includes insurance for property damage, liability, and business interruption (up to policy limits). Property insurance helps protect a company’s buildings and equipment against a specific list of perils, similar to the coverage offered in a standard homeowners policy.
Business interruption insurance covers lost profits and operating expenses that may continue while a business is closed because of a disaster. This type of insurance may kick in after a 48- to 72-hour waiting period only if there is physical damage to the structure or the property is inaccessible because of an Order of Civil Authority that results from a covered peril.
A business that has to shut down due to a power outage may not be covered, unless an optional endorsement for “off-premises service interruption” is purchased at an additional cost. Also, flood damage is typically excluded from standard BOPs, although coverage may be purchased from the government’s National Flood Insurance Program or some private insurers.
Good documentation may speed up the claims process. Try to keep an accurate business inventory and take photos of the premises and all your business property. Store these and other financial records online so they can be accessed from a temporary location, if needed.
Some businesses face unique risks that may require more customized coverage than what is included in a standard BOP. An annual review may help your insurance keep up with company changes.