Flood Insurance Not Enough Coverage for Hurricane Sandy

Hurricane Sandy has left a devastating toll on millions of property owners and potentially thousands of small and medium sized businesses. Conservative estimates have calculated insured losses to exceed $30 billion with many having to wait weeks or even months before they will receive compensation or reimbursement for their loss of property, equipment and or damage to other forms of assets. For those businesses especially in the coastal regions and near large bodies of water who were smart enough to purchase flood insurance, they are in a much better financial and mental position than those who elected to decline this coverage.

However, purchasing flood insurance will only cover the cost of repairing or replacing damaged building(s), property, equipment and stock. But what if a business is in an area where mass destruction and flooding will take weeks or even months to clear up. How will these businesses survive with no income and expenses that still have to be paid?

A natural catastrophic event is a perfect example as to why Business Interruption Insurance should be purchased. This form of coverage can usually be added onto a business insurance policy otherwise known as a CGL-Commercial General Insurance for a relatively small cost varying between 5-10% of the annual premium. Business Interruption insurance provides coverage when an insurable loss forces a business to shut down their operations. It will compensate the business owner for the loss of net profits and will cover ALL necessary expenses until the business is ready to open again. The amount of coverage depends on the limits chosen by the insured. For example, a takeout pizzeria that generates $20,000 a month should consider a minimum business interruption limit of $80,000 (4 months coverage). Other forms of BI coverage includes extra expense which will cover the cost of relocating and operating out of a temporary location until the primary location is ready to open again. Note that offering these limits will require the business to provide substantiated proof in the form of financial statements.

It has been the busiest week of the year at our company with hundreds of callers inquiring about purchasing flood, earthquake and other forms of natural disaster coverage. Take out a few moments to review your policy for this coverage and if required, contact your broker and have them discuss the different options. A few hundred dollars towards upgrading your coverage can potentially save your business tens of hundreds of thousands while keeping your brand operational even through the worst possible scenarios.