Hurricane and Windstorm Coverage
How well does your policy protect you?
The aftermath of a major hurricane or windstorm is no time to discover that you have inadequate insurance coverage. Unfortunately, it happens far too often. Only through dealing with the complex aftermath do many businesses discover gaps in their coverage or previously unknown areas of critical exposure. The following quick checklist highlights some of the most common problem areas and less understood features of insurance coverage. How well would your current policy protect your business each in case?
Power and Utilities
Electricity, gas, water and telecommunications are highly vulnerable to damage from windstorms and hurricanes. Coverage can be purchases for losses resulting from interruption of utility services and off-premises power failure. In order for coverage to apply, the service interruption must result from a covered peril. Also, it is important to review policy language, as some exclude coverage for damage to overhead power lines. Deductibles may vary from 4 hours up to 72 hours of service interruption before coverage kicks in.
Widespread power failures or mechanical breakdowns of refrigeration and climate control equipment can pose a serious risk for perishable goods. These include pharmaceuticals, fruits, meats, and other miscellaneous foods and beverages. Especially if there is no backup generator on site, a “spoilage endorsement” should be purchased to protect against the loss of perishable inventory.
Rebuilding a business often takes several months or longer. Having business interruption coverage for the profits you would have earned had the disaster not occurred provides crucial support during this process. This includes ongoing expenses, such as payroll. Coverage can be purchased at a fixed dollar limit, or for the “actual loss sustained,” from the date the coverage is triggered to the return to “normal business operations.” An “extended period of indemnity” endorsement is also added at times, to provide a smoother transition to normal operations. This extends your business interruption coverage by 30 days, 60 days, 90 days, etc.
Avoid a potential disagreement with your insurance carrier and be certain of your coverage before you need to file a claim. Some policy language for debris removal allows for an additional 5, 10 or 25 percent of coverage above the policy limit. Knowing your policy language is key. It may clearly outline the additional coverage, or the wording may be ambiguous.
Changes each year in local building codes and ordinances can mean that if your older property suffers a substantial loss, simply rebuilding your property as before is likely not in compliance with new laws and codes. Building ordinance or codes coverage, which pays to rebuild a structure to comply with current building codes, can be added to your policy.
Don’t get surprised and let mold remediation become an unexpected out-of-pocket expense. Because of the high cost of mold claims to insurance companies, a majority of insurance policies have been rewritten with a mold exclusion or a cap on coverage. This cap is often far below the true cost to remediate mold.
Unlike other causes of loss with a preset, fixed deductible, the deductible for a windstorm loss amounts to a percentage of the overall policy limit. These percentage deductibles (either 2,3, or 5 percent) can add up quickly and seriously impact your financial recovery. Some business owners choose instead to purchase supplemental coverage in the form of a “buy-back deductible.” This allows them to avoid paying a deductible and pay an additional premium instead.
Have questions about your property insurance claim? Feel free to contact Stark Loss for more information about how a Public Adjuster can help.