Commercial Insurance For Natural Disasters

Losses attributable to natural disasters are typically not included in commercial insurance coverage (or any other insurance coverage, including homeowners insurance). However, the location of a business may require that such coverage be obtained to protect the life of the business. Businesses located along the southeastern coast of the US, for example, should have “windstorm” – that is, “hurricane” insurance, especially considering the increasing frequency since 2004 of severe storms. that plague these areas.

California businesses should seriously consider obtaining earthquake insurance, even though the likelihood of a catastrophic earthquake causing total devastation to a business is less than that of a hurricane hitting the southeastern coast of the United States. Flood insurance, backed by the federal government, really falls into a different category because it is more available and affordable than insurance for the other two types of natural disasters listed above.

Natural disaster insurance for businesses would appear to be a “no-brainer” except for a few key considerations:

The high cost of premiums
High deductibles
Limited coverage
The remote probability of a natural disaster affecting an individual business
However, whether or not a business owner decides to purchase natural disaster insurance, an outside source can make the decision for the business: a business lender or mortgage holder. If a business is located in a high-risk area, a business lender may insist on natural disaster insurance as part of its loan agreements with the business.

Recent major natural disasters, such as Hurricane Katrina and the active hurricane seasons of 2004-2006, have put extreme stress on insurance companies with high concentrations of policyholders in affected areas. This pressure has led to almost unbelievable rate increases in these areas since those stormy seasons, increases of up to 600%. Obviously, the expense of doing business in these high-risk areas has grown proportionally. Unfortunately, however, these high-risk areas correspond to high population densities, high property values, high socioeconomic demographics, and high-income areas, which means they are excellent locations and potentially very lucrative locations for businesses to locate.

Some companies, not tied to risk-averse mortgage holders or lenders, choose not to buy expensive insurance against natural disasters, because they believe that the government will step in to help offset such losses if they do occur. In recent times, the federal government has offered loan guarantees and, in some cases, full grants to help rebuild demolished private residences and, in some cases, businesses as well. However, there are no guarantees that this will continue and it is also important for businesses Structural Warranty Insurance  to consider that loan guarantees are just what they claim to be; They are not direct gifts. Rebuild loans, even if guaranteed by the government, still need to be repaid at some point and could impose impossible debt burdens on a business.

Natural disaster insurance for businesses is a thorny issue with no clear and easy decisions for the average business person located in a high risk area. Your purchase requires careful consideration and weighing up the pros and cons, but even then, the final prudent decision may not be obvious. Sometimes entrepreneurs have to make decisions based on intuition and their individual tolerance for risk, and this is a situation where those factors definitely come into play.