Hurricane season: Is your insurance ready?

The subtle nuances of an insurance policy can dictate whether or not you have coverage as
a business owner. Business interruption is a prime example considering that a single word
(direct) has the all encompassing effect of eliminating coverage for a loss you had assumed
would be paid. Such is the case with other forms of insurance specific to the livelihood of
your business. With the advent of the 2015 hurricane season, and by virtue of a consensus
of experts in the field stating this year will be comparable to 2005 (Katrina), post-disaster
is not the time to find out the limitations of your insurance policies. As a business owner,
you spend countless hours with revenue projections, cost cutting efforts and
financial/strategic planning to assure protection of your profitability. Then why not focus
some of your attention on your insurance program?
Risk Management is the process of risk identification/assessment, limiting or eliminating
risks, retaining risks, and as a last resort insuring risks. That is to say a company should
absorb the financial exposures to loss first and then only insure for those events that could
do irreparable harm to the company’s profitability. Through this Risk Management
process, the final phase of insurance should also be scrutinized in order to prevent any
unforeseen losses assumed to be covered. Since an insurance policy is a legal contract
between the insured (business) and carrier (insurance company), both are bound by the
terms and conditions. Can you trust that your agent and the insurance company have your
best interest in mind? Years ago, a certain insurance carrier who shall remain nameless
was notorious for their philosophy of finding ways to avoid paying a claim. Yet many
companies bought insurance from this carrier because the agents either didn’t know or
wouldn’t tell their clients. Is this action deserving of trust?
After all this is said and done, the insurance most affected by the catastrophic aspects of
hurricanes boils down to your Property coverage. Specifically, this coverage should insure
your physical facilities, contents and equipment. The latter may or may not be covered
under this policy depending on the quantity and valuation of your equipment. But suffice it
to say, coverage for equipment is not automatic. Sometimes property insurance must have
an equipment floater (amendment) adding either a total insured value or based on a
detailed list on file with the insurance carrier. In other cases, a separate equipment policy is
necessary. Which do/should you have? Next in the line of terms and conditions involves
the cause of a loss. Here insurance companies typically refer to coverage as either a
Named Peril or All Risk. Named peril refers to specific named cause of a loss (i.e. fire,
wind, etc.), whereas All Risk covers all perils/events. In this case, both are subject to
exclusions that even in the perceived All Risk form takes away specific events, usually
flood as a start. Co-insurance is another condition to be wary of since it requires the
business to value their property to at least that percentage (usually 80%) of value. This
term forces accurate valuation to assure proper pricing. If however, the business valuation
is less that the stated percentage, then loss payments are reduced proportionately. Finally,

the payment of a loss is based on the stated method: replacement cost, ACV (actual cash
value), FMV (fair market value), or a combination of these.
Hurricane season: Is your insurance ready? There are two ways to find out: using an
independent source to assess your insurance program, or wait until after a loss. The choice
is yours.