Hurricane season begins June 1st, bringing the threat of another devastating storm like Harvey, Sandy, or Maria. Even if you're not in the path of a hurricane, it's likely you face some other kind of threat from wildfires, floods, tornadoes, or earthquakes. While you can't prevent these natural disasters, you can prepare yourself financially.
Protecting Your Personal and Business Property
Ordinary homeowners insurance covers much of the damage to your home from a severe weather event, including tree limbs crashing through your roof or hail dinging your vinyl siding. Renters insurance covers your possessions if you rent your home. But if you own or rent a place of business, you'll need separate business property insurance to cover damage to your business premises and property, including your equipment, fixtures, and inventory.
If you have a home-based business, you may need business property insurance, too. Most homeowners or renters insurance excludes business property losses, or will only cover a small amount. A rider or in-home business policy may offer some additional coverage, but business property insurance is the best option if you need to insure thousands of dollars in equipment and inventory.
Homeowners and business property insurance don't cover everything. Some of the most devastating natural disasters aren't covered, including:
- Flooding. Property insurance covers rain and snow damage, but you usually need separate flood insurance if you want coverage for water that has hit the ground, including storm surge and overflowing rivers.
- Earthquakes. There usually is no coverage for earthquake damage unless you purchase separate earthquake insurance.
- Wind damage. Wind damage is usually covered, but it may be excluded in some hurricane- or tornado-prone areas. You may need an additional windstorm policy.
- Automobile damage. In order to provide protection from weather-related damage, including hail and flood damage, your auto insurance policy must include comprehensive coverage.
Before a storm hits, review your property insurance policies and make sure you have the coverage you need, in the right amounts. A policy you purchased years ago may not have kept pace with the current value of your home, place of business, and possessions. Consider getting a policy that will cover the replacement value of the things you own. While that old computer isn't worth much anymore, it will be expensive to replace.
Protecting the Future of Your Business
If you own a small business, a natural disaster can force you to relocate or shut down for weeks or months. You may be unable to fulfill your contracts, leaving you vulnerable to lawsuits. It's important to have adequate insurance and legal protections in place to safeguard your business's future.
Additional Business Insurance
Additional insurance coverage helps protect your business from the consequences of adverse weather and natural disasters:
- Business Interruption insurance helps compensate you for lost revenue if you lose work time or must temporarily close your business because of a fire, flood, or natural disaster.
- General Liability insurance covers injuries that occur on your premises.
Many small business owners purchase a comprehensive business owners policy that includes property, business interruption, and general liability coverage.
Insurance is a good first line of defense, but some risks aren't covered by even the best insurance policies. Here are two steps to consider to protect your business legally:
- Including the right "force majeure" clause in contracts. A force majeure clause says that, if a specified event beyond your control occurs, you will be partially or totally relieved from your obligations under the contract. Most force majeure clauses include "acts of god" such as hurricanes, tornadoes, earthquakes, and floods, but they may also include other events. A lawyer can help prepare and negotiate force majeure clauses.
- Forming a corporation, LLC, or other business entity. Certain business structures can protect your personal money and property if your business is sued. If a natural disaster leads to a lawsuit or leaves you unable to pay your business debts, operating as a business entity, such as an LLC or corporation, can mean the difference between losing everything you've invested in the business and losing everything you have.
Weather events and natural disasters are an unfortunate part of life, but good insurance coverage and legal protections can help you move on and avoid some of the worst consequences of the storm.
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