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Insurers group offers tips for business owners with storm losses

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The Insurance Information Institute offers guidelines for those businesses that have been affected by the recent weather.

“Businesses are extremely important to the U.S. economy because they provide both goods and services and jobs, so it’s vital they are up and running swiftly after a disaster,” Sean Kevelighan, CEO of Insurance Information Institute, said in a news release.

Kevelighan said the most important step for business owners who have suffered damage is to contact their insurance professional as soon as possible to get the claims process started.

The institute, a nonprofit communications organization supported by the insurance industry, recommends taking the following steps to start the process:

  • Make a list of damaged property. Take photos or video, and the more detailed, the better. Collect business records that are needed to prove the value of damaged equipment, inventory or structures included in an insurance claim.
  • Business income claims, also known as business interruption claims, require proof of revenue the business was generating both before and after the interruption began. These include revenue or sales documents, expense documents, profit-and-loss statements, inventory reports and business plans. Include budgets or forecasts and other documents that demonstrate the projected income of the business. This will make it possible to determine the amount of potential business income lost.
  • Be prepared to show the adjuster the damaged property, as well as financial records or other documents. Note that there may be more than one adjuster, depending on the type of business coverage involved.
  • Get at least two bids from contractors for repairs to a business’s structure. And get estimates on the cost of replacing contents and inventory.
  • Keep copies of all correspondence regarding the claim, and note the name, title and phone number of all contacts made.

It is also important for a business owner to understand what is and is not covered by insurance and the various coverage options available to protect a business.

Wind damage

Property damage is typically covered under a business owners policy or through a commercial multiperil policy. Most commercial property policies provide either:

  • Replacement cost coverage: Pays to rebuild or repair the property, based on current construction costs.
  • Actual cash value coverage: Pays to rebuild or replace the property less depreciation — a decrease in value as a result of wear and tear or age. With actual cash value coverage a business may not be in a position to completely rebuild.

Business income insurance (also known as business interruption), is typically included in a business owners policy or commercial multiperil policy and provides coverage for:

  • Revenue lost because of the closure.
  • Fixed expenses, such as rent and utility costs.
  • Expenses of operating from a temporary location.

To receive appropriate reimbursement from business interruption coverage, there must be direct physical damage to the property resulting from an insured event. Be aware that there is generally a 24- to 48-hour waiting period before business income coverage kicks in.

Businesses that rent or lease a building can purchase tenant coverage, which insures on-premises property, including machinery, furniture and merchandise. The building owner’s policy will not cover contents.

Businesses that were shut down as a result of utility interruption will have coverage if they purchased the optional utility service interruption endorsement to their business or commercial policy. The interruption in utility service must also result from direct physical loss or damage by a covered peril to the type of property covere, whether water, communications or power services supply. Damage caused by power surge is excluded.

Flood damage

Small businesses that suffered flood losses will have coverage under the federal government’s National Flood Insurance Program, if they purchased a flood insurance policy. The NFIP commercial policy provides up to $500,000 on the structure and $500,000 for contents. There are limits, however, and business interruption insurance is not included. Private commercial flood policies, available through the standard insurance market, do cover these losses.

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