Master of Disaster

Know what’s covered—and NOT covered—by your insurance policy before disaster strikes

Words by Scott Chapin

Too many people assume their insurance provides protection for nature/weather events that are not actually covered, which can lead to nasty surprises when disaster strikes. Here is an outline of common natural disasters and what, generally, is covered and not covered by most well-written insurance policies. 

1. Floods: Surface water that enters your business is NOT covered by standard business owner's policies (BOPs). If you are in a flood-prone area, you should consider a flood insurance policy. I've seen a lot of flood claims in areas that have seldom (if ever) dealt with floods. In fact, the Federal Emergency Management Agency (FEMA) reports that 20% of flood claims come from properties located outside of high-risk flood zones. Flood insurance policies can be purchased through the National Flood Insurance Program. In addition, many private insurers will also provide flood coverage for low-hazard areas on a standard property policy. Consult a reputable insurance agent for specifics and benefits of options for your business.

2. Hurricanes: Claims involving hurricanes are often confusing. While wind damage is covered under a standard BOP, surface water damage—often seen in conjunction with wind damage—is not, and you will need a separate flood policy to cover that damage. However, to illustrate the many potential complications, water coming in through a damaged roof is covered by a BOP as "wind damage."

3. Wildfires: There are a couple types of claims we typically see with wildfires—the first is direct loss to the building (covered by standard BOPs), and the second is related to the loss of business income due to “civil authority.” This occurs when a mandatory evacuation occurs and/or access to your business is prohibited. So, while your shop may not be directly damaged by the wildfire, you lose income since you are not allowed to open. Most policies provide limited business income coverage, subject to a waiting period of up to 72 hours.

4. Earthquakes: Earthquake coverage can typically be added to a BOP, depending upon your location. If your shop is located in an earthquake-prone area, you will likely have to purchase coverage from a specialty insurance company. If you have a sprinkler system, you will also need to make sure your policy includes language that ensures protection in the event that the earthquake causes your sprinkler system to engage and damages your shop and/or contents (a pretty common occurrence).    

If you're unsure what your policy covers, you should consult with your insurance agent to discuss the various options available in the marketplace. 

Scott Chapin is an accomplished mountain bike racer, and a bicycle industry risk specialist with Marsh & McLennan Agency. He helps bike shop owners across the United States protect their assets and build stronger businesses, and can be reached at 715-634-6513 or