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Inside this Article
Are There
Any Disasters My Property Insurance Won't Cover?
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Floods, earthquakes and acts of
terrorism are generally not covered.
Natural and
unnatural disasters affect everyone. Some areas of
the United States are so prone to natural
disturbances that many private insurance companies
will not offer coverage.
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For example, most homeowners insurance
will not cover damage caused by floods or earthquakes, and few will
cover forest fires if your property is in an undeveloped area.
Protection Against Flood
Damage.
Property insurance
policies usually exclude coverage for flood damage. Find out
from your local government office or your commercial bank whether
your business is located in a flood zone. Also ask around to find
out whether your location has been flooded in the past.
Government
projects to map flood zones may be slow to keep up with new
developments. If you need to buy a flood insurance policy,
contact your insurance agent or the National Flood
Insurance Program.
The
federal government requires buildings in flood zones that don't
conform to flood plain building codes to be torn down if damage
exceeds 50 percent of the market value. Consider purchasing "ordinance
or law" coverage to help pay for the extra costs of tearing down
the structure and rebuilding it. If your policy contains a coinsurance
clause, make sure your property is sufficiently insured to comply with
the clause.
Protection Against Earthquake
Damage.
Coverage for earthquake damage
is excluded in most property insurance policies, including
homeowners and business owners package policies. If you live in an
earthquake-prone area, you'll need a special earthquake insurance
policy or commercial property earthquake endorsement.
Earthquake policies have a different kind of deductible -- a percentage
of coverage rather than a straight dollar amount. If the building is
insured for $100,000, with a 5% deductible, for example, in the event of
an earthquake, your business would be responsible for the first $5,000
in damage.
Remember that business interruption insurance, which reimburses
you for lost income during a shutdown, applies only to causes of damage
covered under your business property insurance policy. If your
business premises are shut down due to earthquake damage, you'll need to
have earthquake coverage to make a claim under a business interruption
policy.
Protection Against Terrorist
Attack Losses.
Under the Terrorism Risk
Insurance Act of 2002, only businesses that purchase optional
terrorism coverage are covered for losses arising from terrorist acts.
The exception is workers
compensation, which covers injuries and deaths due to acts of terrorism.
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