Since 2016, hurricanes have cost the US economy half a trillion dollars. Over the period from 2016 to 2022, the country was hit by numerous storms. Nineteen of them caused at least one billion dollars in damages each.
The average annual number of weather and climate-related disasters has climbed to 18 in the period from 2018 to 2022. In 2022 alone, extreme weather contributed to 18 individual events that each caused losses exceeding one billion dollars.
Businesses experience losses due to hurricanes because of actual physical property damage, supply chain disruptions, and the loss of customers. Some of these risks can be mitigated through the selection of the right insurance.
Understanding Hurricane Insurance
In the US, hurricane season lasts from June 1 to November 30. Getting the right kind of insurance before disaster strikes is the best way to minimize the eventual losses that may disrupt your business or even contribute to its termination.
Commercial hurricane insurance policies exist and they’re different from traditional commercial property insurance products.
Most types of hurricane policies offer coverage for all of the following issues that a hurricane may contribute to:
· Business disruptions resulting from property or infrastructural damages connected to the hurricane
· Wind damage to commercial property and equipment
· Water damage to commercial property and equipment
Commercial property damage policies usually don’t feature coverage for extreme weather events. Natural disaster coverage needs to be added separately. It’s a good idea to review your current insurance policy or consult a professional who’ll give you a better idea about the risks you’re protected against.
Types of Insurance Coverage to Consider
Apart from looking at specialized hurricane insurance packages for your business, you may want to alternatively consider a couple of products that will protect your organization from the disastrous effects of extreme weather.
A few very important kinds of coverage all companies exposed to extreme weather risks should consider include:
· Property insurance: Commercial property insurance is a must-have, whether you own a small business or a large enterprise. It protects your physical location, equipment, and inventory, compensating you in the event of damage.
· Business interruption insurance: If your business has to shut down after a hurricane temporarily, the business interruption insurance covers lost income over that period. You will get compensated for lost revenue, rent, or any other type of income you used to make and are now no longer capable of generating.
· Flood insurance: Hurricanes increase the risk of flooding, which is why this type of insurance makes sense. Commercial flood insurance is available through the National Flood Insurance Program (NFIP). NFIP provides two main kinds of commercial flood insurance – building and contents. Building insurance provides up to 500,000 dollars in coverage for direct physical damage to a building from flooding. The contents coverage is also set at up to 500,000 dollars. It covers furniture, fixtures, inventory, machinery, and equipment damage.
· Windstorm insurance: A subset of storm insurance, windstorm insurance protects the policyholder from property damage caused by hurricanes, tornadoes, and gales. Physical damage to the property and the equipment/assets inside will usually be covered.
· Comprehensive general liability: Customer injuries, customer property damage, and several other types of claims are covered in the event of having such a policy. It makes sense for all businesses, and not just the ones located in hurricane-prone regions.
Steps to Ensure Comprehensive Hurricane Insurance Coverage
The very first step you need to undertake is to review the commercial insurance policies you have right now. What’s covered and what isn’t? Does the policy offer extensive and comprehensive protection from the damages your business may sustain due to a hurricane?
If you have missing kinds of coverage (like protection from natural disasters, for example), talking to your insurance agent and getting an addition will make a lot of sense. As a general rule of thumb, you should be preparing for the worst. Add-ons will make your commercial insurance more expensive but they’ll save you a lot of money in the long run, especially if disaster strikes.
Adequate wind and flood coverage are non-negotiable, whether you’re getting specialized hurricane insurance or you’re extending the coverage available through your commercial property insurance. Building damage, contents, loss of use, and law and ordinance should all be covered under the policy.
Additionally, make sure you are protected from the losses that will result as a part of business interruption. Shutting down operations for a certain period is often unavoidable in the aftermath of a natural disaster. At the same time, the losses experienced during that period could mean the death of your business.
Reports suggest that 25 percent of companies will never reopen after a natural disaster. The percentage goes up to 40 percent for small businesses that have to shut down for a certain time.
Making sure you’ll be compensated during the times of interrupted operations is the only way to recover from the losses and get your business operational once again within the shortest possible period.
The Best Ways to Mitigate Risks
Hurricane preparedness is just as important as having enough insurance.
A few of the things you can do to minimize damage and losses due to a natural disaster include:
· Make sure you have a business continuity plan that features a hurricane plan
· Order and have hurricane supplies available within the business premises
· Back up the most important data your business uses in everyday operations
· Protect your facilities and equipment (this guide will acquaint you with some of the most important steps)
· Make sure essential employees are informed about their roles and briefed on protocols to follow before natural disasters striking
· Communicate business continuity steps and initiatives with all employees
· Operate remotely as much as possible whenever a hurricane warning is issued
· Secure recovery service providers in advance
As a final tip, always expect the unexpected! Natural disasters will challenge even the most prepared of individuals and business owners.
It’s very important to maintain a flexible mindset in the period during and after the hurricane strikes. Assess the situation and make adjustments to all plans based on the events that unfolded. The ability to alter plans and proactively seek innovative solutions could be the one thing that will ensure your business’s stability and survival in the aftermath of a natural disaster.
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