Seattle Pi:
Many small business owners in the Northeast are still trying to recover from floods caused by as much as 8 inches of rain earlier this month.
Those who had flood insurance can recoup some of their losses, but those who never purchased such coverage are now dealing with the fact that a disaster doesn’t have to be a hurricane, tornado or earthquake to cause cataclysmic damage to a company.
Insurance industry analysts and people who advise small businesses say many companies find themselves underinsured when disasters happen. Many don’t have the specialized policies that would cover disasters, or they have coverage that falls short in dollar terms of what they need. Or they find they didn’t read the fine print about what was and wasn’t covered when they bought insurance.
Being underinsured for a disaster is a common problem for businesses, especially younger ones, said Cathy Weatherford, executive vice president of the National Association of Insurance Commissioners, an organization of regulatory officials from the 50 states, the District of Columbia and 5 U.S. territories.
Cost is a factor when owners decide not to purchase specialized disaster insurance; the premiums and deductibles tend to be high because damage tends to be heavy and insurance company payouts in turn are large. Small business owners without a lot of spare cash often decide to take their chances and hope disaster never strikes.
Equally problematic, Weatherford said, is the attitude of ‘this can’t happen to me’ that many business owners have.
‘Not until you become a victim or you come very close to losing everything do you decide this is something essential for you that you cannot do without,’ she said.
Flood insurance tends to get the most headlines, particularly since Hurricane Katrina inundated New Orleans in 2005. But there is other specialized disaster coverage, such as earthquake insurance, which many businesses in California buy, and landslide insurance, policies that businesses in the Puget Sound area should consider.
But a disaster isn’t limited to a catastrophe wrought by Mother Nature - a fire that destroys a business can be just as disastrous. So a small business needs to consider whether it’s adequately insured for any and all possibilities.
A big difference between disaster insurance, such as flood or landslide coverage and, say, fire coverage, is that disaster insurance isn’t included in a standard business or commercial insurance package. It must be purchased separately. And beware: Many lenders will require you to buy flood insurance for a property, and the Small Business Administration won’t disburse disaster loan money if you were flooded and didn’t have flood insurance. More.
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