Though it started in June and runs until November, it feels like lately, hurricane season has made itself known through two back-to-back devastating hurricanes. Businesses, homeowners, and nonprofits are left with significant damages, and many wonder what role insurance plays when a natural disaster hits. Commercial hurricane insurance is an important combination of policy options for small businesses in coastal regions.
What Is Commercial Hurricane Insurance?
When it comes to protecting your property in the event of a hurricane, the first thing to understand is that there is not one specific policy for hurricane insurance. Instead, three important types of insurance together comprise hurricane insurance. These can be purchased either through endorsements or standalone policies.
If your business has a physical space, then you likely already have a commercial property policy. This is a first-party coverage policy that will take care of the physical structure and, depending on the level and type, the contents, too.
Flood insurance is sold through the National Flood Insurance Program (NFIP). However, some attention needs to be given to the fact that the limits it provides are not really sufficient. The maximum building coverage available is $250,000. Considering that, in 2024, the median home sale price is over $400,000, the NFIP maximum limit really won’t come close.
This, of course, highlights the significant number of people who have their property underinsured. Often, the blame for this problem does not lie with the property owners, who, nonetheless, end up stuck with the bill when a disaster strikes. Many of the communities devastated by Hurricane Helene in the Carolinas were not even close to flood zones, so business insurance for a loss like this wouldn’t be required, and it really wasn’t on the minds of anyone living there.
If you are unfortunate enough to experience a natural disaster like a hurricane, much of the damage your building suffers will be from some form of flooding. Any type of water damage from groundwater is considered flooding, and flood damage is not covered under standard commercial property or homeowner policies. A storm surge qualifies as flood damage because it is groundwater.
So, whenever you see the footage of a storm surge on the news, keep in mind that all of those properties submerged must have flood insurance or they are technically uninsured and there is no coverage for the damage.
During a hurricane, the wind can do as much damage as the water. The tattered roof of Tropicana Field after Hurricane Milton hit St. Petersburg shows how damaging strong winds can be.
The Tropicana Field sustained severe wind damage from Hurricane Milton. (Source: The Jacksonville.com)
That’s why the next important policy to get when building your commercial hurricane insurance is windstorm insurance. Traditionally, a commercial property insurance policy offers coverage for named perils, such as wind or hail. That is, of course, unless you live along the coast.
Coastal living is fun, laid-back, risky, and expensive. For properties along the coast that are at risk of a hurricane, the majority of providers exclude wind coverage from a property policy and instead offer an independent policy just for wind damage. This is especially true of Texas, Louisiana, and Florida. What this means for your business is that to have protection from wind storms, you’ll need a windstorm policy.
Fortunately, some of the insurance you may already have will be helpful in the event of a hurricane. Business interruption insurance, as its name implies, is when your business operations are interrupted and you are not making any money; business interruption insurance can help with the cash flow during the downtime.
However, you should check with your agent to make sure it applies to a natural disaster, and if it doesn’t, see if a rider is available for that type of loss. Your business owner’s policy may already carry this, as it is pretty normal to include it in a BOP.
Hurricane Insurance Deductibles
I worked for a major insurance carrier during Katrina and Charley. Around that time, the company I worked for pulled out of offering policies in Florida. After some negotiations, it reentered the Florida market, but with a new change: a hurricane deductible.
First-party policies carry a deductible. Think of this as coinsurance or a copayment. A deductible is what you will be responsible for if you file a claim. Within the last twenty years, insurance companies have introduced a modified deductible for hurricanes. Often this special deductible only applies if it is a named hurricane.
Here is how a hurricane insurance deductible works: instead of a flat deductible, like $500, a hurricane deductible is a percentage of the total damage. The percentage amount will be whatever you agreed upon when signing up for insurance but will be no less than 1% and no more than 5%. So, if you file a claim and the cost to remove the water and dry out your shop is $30,000, then a 5% hurricane deductible means you will be responsible for $1,500.
Why Does Hurricane Insurance Matter?
Insurance may not be the opening topic of conversation at a party, but people think it matters and are concerned about it. A 2024 poll taken by the Florida Chamber of Commerce found that the top issue for Floridians during this election cycle wasn’t immigration, nor the economy, not even jobs. The top issue Floridians are concerned about in 2024 is property insurance. And this poll predated hurricanes Helene and Milton.
But it makes sense once you see the images of Hurricane Helene and Milton and the terrible destruction a natural disaster can bring. This is especially true if a city like Asheville, NC, is not prepared for the storm. The cost right now is estimated at between $8 and $14 billion in damages for private insurers for Hurricane Helene.
That number represents a significant cost for the private sector and doesn’t take into account the approximately $2 billion in flood damage for the National Flood Insurance Program.
However, the cost goes deeper: there is an economic cost to the community as businesses are unable to operate. There is a social cost as a community wrestles with increases in homelessness, displacement, and the loss of beloved members. Schools are forced to close, important life events are postponed or canceled, and the list goes on and on.
Does commercial insurance fix that? No. But having the right insurance can lessen the stress that will come following a terrible storm, and knowing you are covered can help relieve some of the anxiety after the storm passes and you begin the process of trying to rebuild your business.
How Much Does Commercial Hurricane Insurance Cost?
Commercial hurricane insurance goes through an underwriting process that can take days. So determining an estimated average hurricane insurance cost is not really feasible.
However, a homeowner can expect to pay between $2,600 and over $4,000 annually for a homeowner’s policy that includes coverage for hurricane-related damages. The closer you live to the coast, the higher that price may rise.
There are several other factors an insurance company will use when determining the premium:
- Size of the property (including how many stories)
- Construction materials
- Presence of hurricane shutters
- Proximity of the property to the water
- Age of the property, along with the most recent renovation dates
- Condition of the property
How to Purchase Hurricane Insurance
Standard commercial insurance policies, along with the riders you should consider, are typically available through providers in one of three ways:
- Directly from the provider—either online or by calling
- A broker who works with a provider
- An agent who works with the provider
However, a standalone flood insurance policy can only be purchased through the National Flood Insurance Program. This is a public-private partnership that the federal government runs through private insurance companies. Eligibility depends primarily on whether you live in a flood zone or not. Flood insurance is available elsewhere.
Finally, some states, like Florida, have created their own insurance companies. In many cases, these carriers offer insurance to business owners and private individuals who have been unable to obtain insurance through the traditional private market.
How to Prepare Your Business for a Storm Like Hurricane Milton
The worst-case scenario is that within a day or two, the forecasters announce that a significant storm like Hurricane Milton has suddenly developed and is bearing down on your location. What should you do?
First, in an event like what was just described, you must understand that it is too late to review your policy document. Almost every insurance company is allowed to impose an embargo on coverage adjustments within 24 to 48 hours of a forecasted named storm. That is why it is so important to review your policy documents every year with your agent to make sure you have the appropriate policy and the right limit.
Document everything your business owns. If you don’t have an itemized list, a comprehensive video will work, too. In fact, the video can prove contents better than a list and it takes much less time to create. Having documentation on everything your business owns can go a long way to easing the process of filing a claim for damages.
Put your insurance company on notice. If your business is on the path of a hurricane, it is worth contacting your agent to see if there is a way to let the insurance company know about your situation without actually initiating a claim. This may not be possible. But if it is, it will help accelerate the process of a timely resolution to your claim.
Maintain strict records on the expenses and revenues of your business and keep those records somewhere you can access them in the event of a loss. This will be an important part of proving your claim when you file a business interruption loss.
Have a copy of your policy with you at all times. If you are ordered to evacuate, finding your policy after the fact may be next to impossible. A certificate of insurance will have everything you need to file a claim, but if you want to make sure you understand all of your coverages, take a copy of your policy with you.
Frequently Asked Questions (FAQs)
If your business is in a zone where hurricanes are common, it is absolutely worth the cost of getting it. A category three hurricane can cause enough damage that isn’t covered by a standard policy and can potentially put you out of business if you are uninsured.
Hurricane insurance isn’t one specific policy but a combination of policies or riders that offer water damage, flood, wind, and business interruption coverage. Sometimes, you will have more than one deductible and even more than one claim for each portion of the loss.
Hurricane deductibles, rather than being a flat rate, are a percentage of the total cost of the damage. The percentage is set by the policyholder and is between 1% and 5%. Importantly, a deductible applies each time a claim is filed. So, if your business is unfortunate enough to be damaged by multiple hurricanes, each claim will come with a deductible.
Bottom Line
Unfortunately, natural disasters happen, and the consequences can be destructive. The cost of cleaning up after a hurricane can be impossible for a small business to handle on its own. Hence, having commercial hurricane insurance is an important part of any hurricane preparedness plan.
Commercial hurricane insurance is a policy or combination of policies and riders that protects your business from flood and wind damage. It can also help you with the loss of income if the business is unable to operate for a period of time.
