National Hurricane Preparedness Week is just a few weeks in our rearview mirror, but that doesn't mean the danger has passed. According to the National Hurricane Center, hurricane season is in full swing from:
- June 1 to November 30 for the Atlantic.
- May 15 to November 30 for the Eastern Pacific.
And that means if your business is anywhere near the coastline, you could be in trouble if a big storm hits. Though commercial building insurance – or as we like to call it, Commercial Property Insurance – can help pay to repair or replace damaged physical property, there are some limitations. For starters, if you have a standard commercial building insurance policy, it probably can't help you when a hurricane waterlogs your building and all its contents.
Let's look at five key things to keep in mind about commercial building insurance so you can adequately prepare for the uncertain months ahead.
1. Commercial building insurance has some standard exclusions.
No matter how extensive your coverage may be, every policy has exclusions (i.e., events or circumstances it can't cover). If you truly want some peace of mind, you have to give yourself the opportunity to learn what your coverage can and can't do.
Commercial building insurance can typically cover losses or damages caused by:
However, standard Property Insurance policies generally DO NOT cover hurricane, earthquake, or flood damage unless they have the appropriate riders. We'll explore some relevant riders in more detail later.
So: Standard commercial building insurance is essential for safeguarding your business property, but it alone won't protect you from hurricane damage.
2. Commercial building insurance is necessary whether you rent or own your business property.
If you own the building, you definitely want to insure it (and your mortgage may require you to carry commercial building insurance). If you rent, your landlord will likely include an insurance requirement in your lease. But don't think of the requirement as a burden: Your commercial building insurance can cover…
- The office building you own.
Some highly-specialized or expensive gear may need to be scheduled separately, but your insurance agent can walk you through that.
The main difference between a commercial building insurance policy for owners and renters is that instead of insuring the building, a renter's policy will only need to insure the building's contents – i.e., the stuff you depend on every day to get your work done.
3. Home-based business owners shouldn't rest their hat on their homeowner's or renter's insurance.
Homeowner's policies can be finicky when it comes to insuring business gear. Many may exclude coverage for commercial property altogether unless you add the appropriate rider.
However, homeowner's riders often don't offer as much coverage as a Commercial Property policy does. If an entire portion of your house is dedicated to your business, it may make more sense to purchase a standalone commercial building insurance policy. You can learn more about the limitations of homeowner's insurance in our infographic "Is Your Home-Based Business Covered?"
4. Yes, it matters whether you have replacement-value coverage or actual-cash-value coverage.
You may have the option to insure your business property at its replacement value or actual cash value. The difference is that replacement-value coverage can help you replace your property at today's prices, whereas actual-cash-value coverage takes depreciation into account. Replacement-value coverage costs more but it also pays out more in the event of a claim. Learn more in "How to Get Affordable Commercial Property Insurance."
5. To address hurricane season concerns, you need some commercial building insurance riders.
If your business is near the coast, talk to your agent about adding a hurricane insurance or flood insurance rider to your commercial building insurance policy. This rider can help pay for losses or damages caused by water entering your building (for more on how expensive water damage can be, read "Spring Flood Season's Here. Is Your Business Ready?").
As an additional safeguard, you may want to explore a Business Interruption Insurance rider that can help you pay for ongoing expenses when a hurricane keeps your business from operating. You can often get this coverage if your purchase your commercial building insurance through a Business Owner's Policy. This insurance package typically bundles Property Insurance, General Liability Insurance, and Business Interruption Insurance together at a reduced rate for qualifying businesses.
To learn more about how to prep your business so it can survive a disaster, read "Small Business Spotlight: Natural Disaster Aftermath with eMazzanti Technologies." For a much bleaker take on the topic, check out "How Many Natural Disasters Does it Take to Ruin a Small Business?"