As estimates reveal that insured damages from Dorian could reach up to $25 billion, the hurricane was a clear signal that this catastrophic season is far from over. And, with the US Small Business Administration (SBA) finding that more than 90% of small businesses fail within two years of being struck by a disaster, risk mitigation for natural catastrophes continues to be of the utmost importance, especially for companies located on coastlines.
“One thing that's notable in these coastal communities has been hurricanes that have not been strictly wind events, but have been accompanied by flooding,” said Dave Stanard, chief small business advocate for THREE, Berkshire Hathaway’s comprehensive small business insurance provider. “More recently, one example with respect to Texas is Hurricane Harvey, and there, it wasn't so much the wind or the storm surge, but the accumulated rainfall with inadequate drainage. That weather pattern sat over the area of Houston for four days and that rainfall accumulated, so many businesses were flooded.”
Local business owners with operations on the coast can, however, ensure they’re prepared should another hurricane hit their community. One risk mitigation tip that brokers and agents can help them with is conducting a thorough insurance review.
“One of the ways that we think it’s important for small businesses to prepare for a hurricane is to first do a simple review of their insurance coverage, starting with [asking if] they are aware of the relevant deductibles that they might have specific to a hurricane or named storm that might be distinct from their other property deductibles,” explained Stanard, adding that checking if a policy is up to date is also important, as is noting restrictions and coverage for property located away or outside of the main premises.
Whether they have coverage for water damage also needs to be crystal clear.
“[They should be] sitting down with their broker and agent, and becoming aware of the way that their policy will respond to an event. Then they'll have the right coverage, whether it be for damage due to wind, storm surge, or accumulated rainfall,” said Stanard, listing mold as another potential issue. “After these events, particularly if they've been asked to evacuate, they may not have access to their property for some days or even weeks. If there's moisture, that can allow mold to grow, and the way that insurance policies cover that can vary.”
The right insurance policy can help insureds navigate rocky waters by outlining their coverage clearly.
“One of the things that THREE does that really helps this process is the way it lays out the property coverage is crystal clear and very straightforward. There's no hidden language excluding certain types of coverage that small businesses may need following a disaster,” explained Stanard. “The property that's covered on the policy is covered anywhere in the world, off premises or in transit, and we don't distinguish between property losses, either coming from wind or from hail or from water damage, whether that's from storm surge, or accumulated rainfall or some other kind of flooding.”
THREE also combines coverage for workers’ compensation, multiple liability coverages, and property and auto into one comprehensive, three-page insurance policy, making it that much easier to read and understand.
On the bright side, while hurricanes are likely to continue pummelling US coastlines in the future, many businesses are already taking risk mitigation seriously.
“Small businesses are probably better prepared this year than in years' past, and I think with each unfortunate catastrophe – and we've seen several over the last decade – small businesses are becoming more aware, and frankly, cities and municipalities are becoming better prepared with help from FEMA in preparing their evacuation plans and mitigation,” said the THREE leader.