Winter Storms Can Prove Costly; Business Owners Need To Be Prepared With The Right Commercial Insurance Coverage

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Feb 09, 2011, 03:44 ET

SEVERE WEATHER IN 2010 CAUSED THE MOST WINTER-RELATED INSURED LOSSES IN THE U.S. SINCE 2003

NEW YORK, Feb. 9, 2011 /PRNewswire-USNewswire/ -- The severe winter weather in the U.S. last week may have caused more than $1 billion in insured losses, many of these commercial losses, putting 2011 on a path toward equaling, or even surpassing, the $2.6 billion in winter-related insurance claims generated nationwide in 2010, according to the Insurance Information Institute.

A good portion of the damage from the first week of February 2011 was the result of wet, heavy snow, which caused collapses to roofs, porches, awnings, carports and outbuildings. In addition, the storm prompted more than 30 auto plants and facilities across the Midwest to temporarily shut down production; many power plants were disrupted by the severe weather; and record electricity demand overwhelmed the system, resulting in widespread blackouts, according to AIR Worldwide.

There is also likely to be significant damage from downed trees and limbs, along with claims for wind- and snow-melt leakage. Significant auto damage due to cars being crushed by tree limbs, as well as weather-related traffic accidents, is also anticipated.

For businesses that do not have the right type and amount of insurance, such losses could wreak havoc on their bottom line. Last week in Indiana, for example, the roof of a business that makes steel products collapsed under the weight of more than a foot of snow, while in Connecticut, the top of an auto repair and towing business caved in. Meanwhile, the Adirondack Sports Complex in upstate Queensbury, New York, was temporarily closed because its roof partially collapsed, due to weight of snow and ice.

Roof and building collapse from snow is covered under a standard businessowners policy. Businesses that are stricken with a power outage can also utilize property insurance or coverage for their machinery to recover some losses.

"Too many business owners fail to think about how they would manage if a disaster damaged their business premises so that it was temporarily unusable," said Loretta Worters, vice president with the I.I.I. "A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick resumption of business after a disaster is essential and it starts with having the right type and amount of business insurance," she added.

A Businessowners Policy (BOP) is recommended for most small businesses (usually 100 employees or less), as it is often the most affordable way to obtain broad coverage. Only small- to medium-sized businesses that meet certain criteria are eligible for a BOP—these include the size of the premises, the required limits of liability, the type of business and the extent of offsite activity. Premiums for BOP policies are based on these factors plus business location, financial stability, building construction, security features and fire hazards.

BOPs are "off the shelf" policies that combine many of the basic coverages needed by a typical small business into a standard package at a premium that generally comes to less than purchasing the coverages separately. As it combines both property and liability insurance, a BOP will cover your business in the event of property damage, suspended operations, and lawsuits resulting from bodily injury or property damage to others.

The BOP also includes business income insurance, sometimes called business interruption insurance. This compensates a business owner for income lost following a disaster. Disasters typically disrupt operations and may force a business to vacate its premises. Business interruption insurance covers the profits you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt. Business income insurance also covers the extra expense that may be incurred if a business must operate out of a temporary location. There is generally a 48-hour waiting period before business interruption coverage kicks in.

The I.I.I. also recommends that business owners create and maintain a detailed business inventory. The I.I.I. provides secure, online inventory software that can make it easy and efficient to keep an inventory for your business: Know Your Stuff® - Business Inventory.

A business inventory can help you:

Purchase the right amount and type of insurance
Substantiate property losses to make filing an insurance claim faster and easier

AIR estimated the February 1-2, 2011 storms, which impacted millions of Americans residing in nearly 30 states, caused anywhere from $790 million to $1.4 billion in insured losses, while Munich Re put the year-end 2010 winter-related losses at $2.6 billion, making last year the most severe in the U.S. since 2003.

RELATED LINKS

Insuring Your Home Business

Insuring Your Business: Small Business Owners' Guide to Insurance

Video: Test Your Insurance IQ: Business Owners Policies

Audio: I.I.I. Provides Tips to Make Sure Your Business is Not Underinsured.

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SOURCE Insurance Information Institute