While homeowner’s insurance is certainly a necessity when you have a mortgage, small business owners need to think about disaster coverage even more than homeowners. Chris Kissell of Insurance.com says that a homeowner can find another place to stay with family or friends but finding another livelihood is a bit harder. During times when a natural disaster is in the daily news, businesses and homeowners think about extra insurance coverage without any prompting. However, it should be kept in mind at all times.
Homeowners can get a standard policy that covers the structure and contents of a home but flood insurance is optional and requires a separate policy. Loretta Worters, vice president of the Insurance Information Institute, recommends that every homeowner and business owner should invest in flood insurance. She recommends it no matter where the house or business is located because you never know where a flood will strike. Water doesn’t follow the laid out flood zones.
Regular homeowner’s and business insurance protects your house or business from windstorm damage but not earthquakes or flooding. There is a National Flood Insurance Program that protects homes up to $250,000 and the contents up to $100,000. Businesses are covered up to up to $500,000 for the building and $500,000 for its contents. Then you will need to get an additional policy for earthquake coverage.
If you need more than that there are other programs on the market. You can separately purchase earthquake policies, but nothing will cover nuclear disaster. Worters says, “Nuclear is like war, and they can’t insure a home for war. It’s not anyone’s fault.”
Homeowners and business owners tend to have a sense of denial that a disaster can strike them. That is obvious because even in the flood-prone areas only 12% of homes get flood coverage. California proves the same statistic with earthquake insurance. Every homeowner and business owner should assess their risks and be wise. Is your home or place of business close to water or a fault line?
If your business is more along the lines of a hobby, the risk of loss is not as great as when your main income is coming from the business. You need to weigh how much you have invested in the business and get disaster coverage if the business is your main money source.
The cost of the extra insurance coverage will vary depending on the location, size, and type of business as well as assessed risk and other factors. You might argue that you don’t have the money but flood insurance in low risk areas only costs $300-$400 per year and quake coverage costs from $300 – $500. Isn’t it better to be safe than sorry? Several hundred dollars a year can protect you from tens or hundreds of thousand dollars in damage.
If a natural disaster occurred would you be able to reopen your business? More than 25% of businesses shut down by a natural disaster never re-open. It might be worth investing in disaster coverage for your small business.
