The earthquake and hurricane along the East Coast are reminders to small business owners across the country: You need to buy adequate insurance for your company.
Many owners cut back on their insurance during the recession to save money. If your company is doing better, you should think about upping your coverage. If you've been able to buy new equipment or upgrade your property, that's another reason to call your broker.
WHAT INSURANCE DO YOU NEED?
There's a two-part answer to that question: It depends on where you live and how much you're willing to bet that your business will be damaged or destroyed by a natural disaster.
The 5.8-magnitude quake on Wednesday caught millions by surprise. Quakes are a rarity in the eastern half of the country. But there was damage to many buildings.
Owners who thought their standard business owners' policy would cover the damage were disappointed. These policies will cover damage from tornadoes, rain, wind and hail, but not earthquakes. If you want quake insurance, you'll need to ask your broker about purchasing a separate policy.
In California, the Earthquake Authority runs a website about quake insurance, www.earthquakeauthority.com. It also helps residents and businesses find insurance. Other states don't have similar services, but you may be able to get information from your state insurance department.
Earthquake insurance can be expensive. In California, deductibles are either 10 percent or 15 percent of the replacement value of a structure, according to the Insurance Information Institute. But in some parts of the country, where quakes are less common, the deductible could be as low as 2 percent. Premiums also vary widely.
Insuring your business for a hurricane is easier _ the rain and wind a storm brings are covered under the business-owners' policy. The problem is when the hurricane causes flooding.
Floods are another natural disaster that requires a separate policy. The federal government has a flood insurance program, and you can learn about it at www.floodsmart.gov. You can purchase it through a property and casualty insurer, but it's the government that pays out if you have a flood.
What's the difference between coverage for rain and coverage for flood? If water enters your building from rain soaking the roof, or the wind breaking a window or tearing a hole in the roof, your business owners' policy will cover you. But if a flood at ground level sends water into the building, you need flood insurance to be reimbursed.
If you run a business out of your home, be aware that your homeowners' insurance might not cover you if you suffer a business loss. For example, if your home office is flooded and your server is ruined. Check with your broker to see if you need a separate policy.
You should also check with your broker to be sure that damage to your vehicles is covered by your business-auto insurance. Collision insurance won't do it _ you need to buy comprehensive insurance.
PHYSICAL DAMAGE IS JUST PART OF THE PROBLEM
If your business is knocked out of operation by a natural disaster, you could be in trouble if you don't have business-interruption insurance. This insurance, which often is part of a business-owners' policy, will pay your operating expenses like payroll and lease payments for your equipment. It also covers lost profits.
Many business owners' policies include business interruption insurance. It's a good idea to be sure that you do have this coverage _ and that you have adequate insurance if your business is sidelined for an extended period.
Business interruption insurance will also cover you if the natural disaster strikes one of your vendors. U.S. manufacturers with business interruption insurance were able to collect when their suppliers in Japan could not operate after the March 11 earthquake and tsunami.
FOR MORE INFORMATION ...
The National Association of Insurance Commissioners, which represents state insurance officials, has a primer on small business insurance at www.insureuonline.org/smallbusiness.
The Insurance Information Institute also has information at www.iii.org.
Search online for your state information department for more information. Some property and casualty insurers can also be resources.