Do you need business insurance to plan for the coming storm? | Business

How often do you look at your insurance policy? Edd Bomar, a partner and owner in McClure, Bomar and Harris LLC, an insurance agency with offices in Shreveport, Ruston, and Baton Rouge believes the answer is “as infrequently as possible.”

“Insurance is the last thing people want to look at and talk about, until they need it.” Bomar said. By then, it could be too late.

What is also too late is getting any insurance once a named storm crosses into the Gulf of Mexico. Bomar said once a storm is named, insurance companies are told to not bind policies until it has passed.

According to the National Oceanic and Atmospheric Administration, 2024 could bring multiple instances of “holds” placed on insurance policies. In May, NOAA announced that the agency had 70% certainty there will be 17 to 25 named storms this year of which 4 to 7 will be major hurricanes.

A hurricane is not the only weather system that can cause damage to business property, but they have been some of the costliest.

In 2005, according to the U.S. Department of Commerce, Hurricane Katrina generated 156,600 business claims that led to roughly $20 billion in payouts.

We asked Bomar ways that business owners can be proactive in insulating themselves from losses. Number one, he said, is to read your policy to see what is actually covered. 

“In the basic policy, flood is not covered. It is a separate policy, a separate premium.” Flood insurance is provided by the federal government through the National Flood Insurance Program. The rate policy holders are given is based primarily on where their property sits on flood maps and the elevation of the building’s foundation.

Flood insurance is a hot-button issue. As premiums have risen, more residents and businesses have chosen to opt out of the important coverage.  In 2023, U.S. Sen. Bill Cassidy, R-LA and several other legislators proposed the National Flood Insurance Program Reauthorization Act of 2023 in an effort to reduce costs. What the senator and others want to do is roll back a FEMA risk assessment system called Risk Rating 2.0. 

Cassidy took to the Senate floor Monday afternoon for the fourth time to urge action for a program that affects all coasts and any place where there is a river or stream with a risk of flooding. Cassidy told the chamber that an estimated 900 thousand people—or one-fifth of all policy holders nationwide—are dropping their coverage because it’s unaffordable.

“When that happens, the pool of policyholders shrinks, and the program enters what’s called an actuarial death spiral,” he said. Cassidy and his team are working on a program to roll back Risk Rating 2.0 to make flood insurance more affordable.

But flood insurance, while important, covers only rising waters. Damage from wind or from water that comes in through a damaged roof will generally be covered by a homeowner or fire policy, but Bomar stresses again that you need to be familiar with your policy to know what your coverage is.

We asked Bomar, a 50-plus year veteran of the insurance industry, what type of coverage he thinks every business should have.

Replacement of your building. This can come in two varieties. Actual replacement is the cost less your deductible. Actual cash value is replacement value less depreciation. An example of a cash value payout, said Bomar, would be  “It could cost a million to rebuild the building, but if the building is 30 years old, cash value may only be $450K.” 

A loss of income policy would kick in if your business is damaged and can’t operate. Bomar said this is also important to have if you rent property and the rent is lost because of property damage.

A number of courts, including the Louisiana Supreme Court, have ruled loss of income applies only when there is physical damage to property, so business shutdowns because of something like COVID or water loss due to frozen or broken city pipes would not be covered.

You should nave a liability policy in case someone on your property is hurt. We asked Bomar the “safe amount” for a liability policy. “Safe? All you can finance,” he urged. “We typically quote $1M. Usually the lowest insurance companies will write is $300K, but you can buy $300, $500, $1M and you can buy umbrellas over that for an unknown amount.”

If there are valuable items in your buildings, they may need special coverage. If you have a business that handles a lot of cash, you can purchase a crime policy that will cover you if someone breaks in and steals the money and also covers employee theft.

There are policies for contents coverage and cyber liability to cover your business being hacked. Bomar confirmed cyber liability has become much more popular over the past 3 years.

There are also a variety of specialty policies for certain businesses, like cargo insurance for trucking companies and inland marine for stored equipment. 

The different types of policies can be confusing so Bomar recommends meeting with your insurance agent for a yearly talk. “It’s like a doctor, you don’t want to talk about going to a doctor until you get sick.” What is true for health, he said, is also true for insurance protection.