How Businesses Insure Against Disaster

When a natural disaster like Japan's earthquake and resulting tsunami hit, normal citizens aren't the only ones who are affected. Small businesses also feel the pain of the destruction. Luckily, insurance can help ease that pain.

“A small business will have a Business Owner’s Policy, which is a combination of liability and business property insurance in a box,” Charlie Schein, owner of Star-Schein Insurance Agency, tells MainStreet. This policy tells the holder what they can and cannot file for and ultimately dictates what the insurance company will pay out.

Most standard business policies will insure against wind, fire, snow and volcanic eruptions. However, floods and earthquakes are typically considered excluded perils. Coverage for other “Acts of God” or man-made disasters like oil spills depends on whether business owners elect to have these tragedies written into their policy.

Insuring Your Biz Against “Acts of God”

According to Ken P. Foley, an insurance agent and owner of PFT&K Insurance Brokers, “Act of God” insurance as a standalone entity is an urban legend.

“There’s no such thing, “Foley says. “You can insure named perils or remove exclusions (like pollution) that preclude coverage,” but buying an insurance policy against all perceived “acts of God” is not typically offered by insurance companies. What business owners can opt for, instead, is a detailed casualty insurance policy that will cover them against specific major disasters (such as the wind, fire, snow, theft, vandalism, etc.) How long this list is depends on the policy, which can be lengthened to include disasters if the business owner is willing to pay a higher premium.

“Casualty insurance typically covers most of the Lords’ misdeeds, unless there’s a specific exclusion for floods, etc.,” Chicago attorney John O’Brien tells MainStreet. “And such exclusions apply, regardless of whether the flood was caused by Him or your next-door neighbor.”