DISASTER PREPAREDNESS
5
QUESTIONS TO ASK YOUR BROKER ABOUT PROTECTING AGAINST NATURE’ S REVENGE
Natural disaster may not be on your broker’ s mind when you discuss coverage, particularly if the focus is on you saving money. Here are five questions to ask when considering how to insure against a calamity.
1 What does my policy cover in a disaster? J. Austin Ice, agency principal at Ice Insurance Agency in Sacramento, says one of the biggest questions that doesn’ t get discussed is what’ s actually covered. Some less-than-thorough agents neglect to have a comprehensive conversation about what your day-today business operations look like and how they’ d be affected in an earthquake, flood or wildfire.
2 What’ s the financial strength of the insurer I’ m buying from? Regionwide disasters put financial strain on insurers. Stuart Nelson, president of Point West Insurance in Sacramento, says you want to buy from a company that has scored no lower than an A- from ratings agency A. M. Best. And even with an A-, the company should be in a financial size category( FSC) of VII or larger.( You can sign up to check the ratings for free.)
3 Is my flood insurance adequate to cover my costs? Federal flood insurance caps out at $ 500,000 for commercial structures, Nelson says. You can buy additional coverage on top of that from a private insurer. To fully cover a $ 1.5-million building, your premium would go up perhaps an additional 125 percent, he says. You’ d pay perhaps $ 1,200 a year for the base $ 500,000 coverage and an additional $ 1,500 for the private coverage.
4 Am I protected against the cost of new building codes if I need to start over? If you own your building or are a tenant who’ s paying rent only on a building’ s shell, the additional cost of upgrading to current building codes is a big consideration in California. New Title 24 energy requirements and state Americans with Disabilities Act regulations mean that reconstruction can cost significantly more than the structure originally did to put up, says Nelson. Ask about upgrade coverage to cover your bases.
5 Is the insurance on my contents adequate? As is true in insuring a building, if you paid $ 50,000 to outfit your store, insuring against a $ 50,000 loss may not be enough— you have to cover what the contents would cost you today, Nelson says. ils like a fire, says J. Austin Ice, agency principal at Ice Insurance Agency in Sacramento. Unhappily, if you get wiped out in an event that’ s not covered by your regular policy— say a flood or earthquake— your interruption insurance doesn’ t operate either. So if you buy flood or earthquake insurance, you need to separately buy business interruption insurance for those scenarios, he says.
Some businesses should plan for one more nightmare case: a toxic spill caused by a natural cataclysm. If your company is at risk for contaminating your own or others’ property when all systems fail, you need pollution coverage, says Ice. Since that’ s often limited or outright excluded from property policies, you can either buy a separate endorsement from your insurer or pay your insurer to eliminate the exclusion. The costs can range from hundreds to thousands of dollars a year in extra premiums, depending on the risk you pose, he says.
The takeaway? As with everything insured, your risk profile is individual. So is your company’ s risk itself. Even those on high ground may not be as safe as they imagine should the levees break: the Federal Emergency Management Agency says that 20 percent of flood insurance claims come from areas that aren’ t high risks for flooding. •
Steven Yoder writes about business, real estate and criminal justice. His work has appeared in The Fiscal Times, Salon, The American Prospect and elsewhere. On Twitter @ syodertweet and at stevenyoder. net.
72 comstocksmag. com | January 2018