Business Preparations for Hurricane Season

Courtesy of iii.org

No business is totally immune from disaster. Every year, businesses temporarily shut down?or close forever?because of a disaster such as a flood, fire or hurricane. Forty percent of businesses do not reopen after a disaster and another 25 percent fail within one year, according to the Federal Emergency Management Agency (FEMA).

Fortunately, you can take proactive steps to mitigate the impact of a disaster on your business. In addition, carrying adequate insurance coverage can help your business get back on its feet quickly.

Disaster preparation

Households?especially in areas prone to hurricanes, tornadoes and earthquakes?often prepare for disasters by storing extra supplies, having an evacuation plan, and learning about emergency resources. Businesses similarly want to prepare, with a focus on restoring your operations as soon as possible and minimizing your losses. To prepare adequately for a disaster, take the following steps:

  • Develop a formal written plan?Sometimes called a “Disaster Recovery Plan” or “Business Continuity Plan,” this document should detail how your business will respond to and recover from a disaster, including temporarily relocating your business. The National Fire Protection Association (NFPA) has developed a National Preparedness Standard for developing a plan. Some businesses also develop specific plans to protect and recover their information technology (IT) infrastructure. In today’s era of cloud computing, it is increasingly easier to back up data offsite.
  • Train employees?Share your Disaster Recovery Plan with employees, assign responsibilities, and offer training so that your workforce can help your business recover. You may also want to conduct drills to assess and improve response.
  • Store emergency supplies?Keep flashlights, a first-aid kit and a battery-powered radio on hand at your business. Depending on its location, you may even want to store food, water and blankets. As feasible and needed, consider stocking equipment that can help your business return to operations, such as a generator.
  • Maintain key information offsite?To get your business up and operating again after a disaster, you’ll need to be able to access critical business information. In addition to backing up computer data, keep an offsite list of your insurance policies, banking information and the phone numbers of employees, key customers, vendors and suppliers, your insurance professional and others. You’ll also want to maintain an inventory of your business equipment, supplies and merchandise; you may want to photograph items as well.

Disaster response and recovery

After a disaster, you’ll want to put your Disaster Recovery Plan into action. Read the Insurance Information Institute’s “Best Practices for Filing a Business Insurance Claim,” which details several steps to control damage and recover costs. In the immediate aftermath of a disaster, take the following actions as appropriate:

  • Secure your building, boarding up entry points if necessary.
  • Make temporary repairs, especially to minimize further damage, such as placing a tarp over a hole in your roof.
  • Relocate salvageable equipment and property to a safe, protected location.
  • Inspect your property and keep a detailed list of damages; take photos to document damage.
  • Clean up your property, taking care to wear safety gear such as gloves and protective eyewear. If feasible, save damaged property in case it needs to be inspected by your insurance adjuster.
  • Contact your insurance professional and your insurer to begin the claims process.
  • Keep receipts of all expenses related to the disaster.

Once you’ve secured your property and taken other immediate steps, you can begin to focus on making your business operational once again. You should lay the groundwork for restarting operations in your Disaster Recovery Plan. Issues to consider include:

  • Location?Should you open a new temporary location or can you operate from your home or use the facilities of a partner or even friendly competitor?
  • Communications?How will you communicate with your employees, customers, vendors and suppliers?
  • Insurance claims?In addition to filing a property claim, you’ll want to file a business interruption insurance claim, if you carry this type of coverage. This insurance will help you cover costs of relocating as well as lost income.

Outlook for 2018 Atlantic Hurricanes

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Colorado State University (CSU) released its updated outlook for the 2018 Atlantic hurricane season today, and they are now calling for a below-normal season with a total of 11 named storms (including Alberto which formed in May), four hurricanes and one major hurricane (maximum sustained winds of 111 miles per hour or greater; Category 3-5 on the Saffir-Simpson Wind Scale) (Figure 1). This prediction is a considerable reduction from their June outlook which called for 14 named storms, six hurricanes and two major hurricanes. Accumulated Cyclone Energy (ACE) and Net Tropical Cyclone (NTC) activity are integrated metrics that take into account the frequency, intensity and duration of storms.

Figure 1: July 2, 2018 outlook for the forthcoming Atlantic hurricane season.

CSU employs a statistical model as one of its primary outlook tools. The statistical model uses historical oceanic and atmospheric data to find predictors that worked well at forecasting prior year’s hurricane activity and has shown considerable skill based on data back to 1982 ). The statistical forecast for 2018 is calling for a below-average season.

CSU also uses an analog approach, whereby the team looks for past years with conditions that were most similar to what they see currently, and what they predict for the peak of the Atlantic hurricane season (August-October). The forecast team currently anticipates below-average to near-average sea surface temperatures (SSTs) in the tropical Atlantic and warm neutral to weak El Niño conditions in the eastern and central Pacific. This averaging of the five analog seasons also calls for a below-average season .

The primary reason for the reduction in the seasonal forecast was due to continued anomalous cooling of the tropical Atlantic. Most of the Atlantic right now is much cooler than normal. (Figure 4). In fact, current sea surface temperature anomalies in the tropical Atlantic are colder than any year since 1994. In addition to providing less fuel for storms, a cooler tropical Atlantic is also associated with a more stable and drier atmosphere as well as higher pressure. All of these conditions tend to suppress Atlantic hurricane activity.

CSU also believes that the chance has increased for a weak El Niño event developing to coincide with the peak of Atlantic hurricane season. El Niños tend to reduce Atlantic hurricane activity through increases in upper-level winds that tear apart hurricanes as they are trying to develop. The dynamical and statistical model guidance is about evenly split between El Niño and neutral (neither El Niño nor La Niña) conditions for the peak of the Atlantic hurricane season (August-October)

Coastal residents are reminded that it takes only one storm to make any hurricane season an “active” one. For example, CSU correctly predicted a quiet Atlantic hurricane season in 1992. The season, in fact, was very quiet, with only seven named storms, four hurricanes and one major hurricane—but that major hurricane happened to be Hurricane Andrew, which tore across south Florida as a Category 5.

Tornado Tips

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Warnings/watches

Remember that a watch means that weather conditions are favorable for tornadoes and a warning means one has been spotted in your area.

  • Learn the warning signals used in your community. If a siren sounds, that means stay inside and take cover.
  • Consider setting up a neighborhood information program through a club, church group or community group. Hold briefings on safety procedures as tornado season approaches. Set up a system to make sure senior citizens and shut-ins are alerted if there is a tornado warning.

Seeking shelter

Do not try to outrun a tornado. Instead, stay calm and seek shelter.

  • At home or work, seek shelter in the central part of the building, away from windows. Basements are the best havens. If this is not an option, take cover in the bathroom, closet, interior hallway or under a heavy piece of furniture.
  • If you are in your car, abandon your vehicle and seek shelter in the nearest ditch if no other facility is available.
  • People living in mobile homes should vacate the premises and seek shelter elsewhere.

Protecting your property

  • If a tornado watch has been issued, move cars inside a garage or carport to avoid damage from hail that often accompanies tornadoes. Keep your car keys and house keys with you.
  • If time permits, move lawn furniture and yard equipment such as lawnmowers inside. Otherwise they could become damaged or act as dangerous projectiles causing serious injury or damage.
  • Make an inventory of your possessions and store it off the premises. If your belongings are damaged, this list will help facilitate the claim filing process.

Hurricane Deductible Infographic

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The official Atlantic hurricane season runs from June through November, but occasionally storms form outside those months. September is the most common month for hurricanes making landfall in the U.S., followed by August and October, according to an analysis of 1851 to 2015 data by the National Oceanic and Atmospheric Administration. No hurricanes made U.S. landfall before June and after November during the period studied.

2018 Hurricane Forecast: Dr. Philip Klotzbach and Michael Bell of Colorado State University (CSU) released an updated forecast for the 2018 Atlantic hurricane season at the end of May. The CSU team now envisions a near-average season with 14 named storms, six hurricanes, and two major hurricanes. The May forecast is slightly lower than their original outlook which called for 14 named storms, seven hurricanes, and three major hurricanes. A typical year has 12 named storms, six hurricanes, and three major hurricanes, according to the National Oceanic and Atmospheric Administration (NOAA). Major hurricanes (Category 3 or higher) have sustained wind speeds of at least 111 miles per hour.

What is a Hurricane Deductible?

Insurance Guide 2018 Hurricane Season

Courtesy of iii.org

Hurricane season takes place June 1 – November 30 every year. Don’t wait until after you have a loss to check your insurance—review your homeowners or renters policies to make you have the right coverage in the event you’re hit with a destructive storm.


Make sure your home’s structure has adequate coverage

Standard homeowners insurance covers the structure of your house for disasters such as hurricanes and windstorms, along with a host of other disasters. It’s important to understand the elements that might affect your insurance payout after a hurricane, and adjust your policies accordingly.

  • Understand your hurricane/windstorm deductible – Insurers in every coastal state from Maine to Texas include separate deductibles for hurricanes and/or windstorms in their homeowners policies, stated on the Declarations (front) page of your homeowners policy.

A hurricane deductible is applied only to hurricanes, whereas a windstorm deductible applies to any type of wind. If your policy has a hurricane deductible, it will clearly state the specific “trigger” that would cause the deductible to go into effect.

Unlike the standard “dollar deductible” on a homeowners policy, a hurricane or windstorm deductible is usually expressed as a percentage, generally from 1 to 5 percent of the insured value of the structure of your home.

If you live in an area at high risk for hurricanes, your hurricane deductible may be a higher percentage. Depending on your insurer and the state where you live, you may have the option of paying more money in premiums in exchange for a lower deductible.

Like any deductible, a hurricane or windstorm deductible will affect the bottom line of your insurance payout. If you have a high hurricane or windstorm deductible consider putting aside the additional money you may need to rebuild your home.

One common exclusion is flooding. People tend to underestimate this risk, but 90 percent of all natural disasters—especially hurricanes—include some form of flooding. If you live in a flood zone or a hurricane-prone area, a separate flood insurance policy is a must.

Another common exclusion is sewer backups (which is also not covered by flood insurance) Sewer backup insurance is also good to have in hurricane-prone areas.

Get to know all of the exclusions in your policy and either talk to your insurance professional about purchasing separate coverage, or be prepared to pay out of pocket for the damages that are excluded in your policy.

  • If you own a co-op apartment or condo – check with your management company and the bylaws to understand what is covered under the building’s master insurance policy versus what damages you need to cover in your own co-op or condo owners insurance policy.

Make sure your possessions are adequately insured

Imagine the cost of repurchasing all of your furniture, clothing and other personal possessions. Whether you have homeowners insurance or renters insurance, your policy provides protection against loss or damage due to a hurricane.

  • Determine the value of your possessions with a home inventoryCreating a full inventory of your belongings and their value will make it easy to see if you are sufficiently insured for either replacement cost or cash value of the items. It will also help speed the insurance claims process and help provide proof of losses for tax or disaster aid purposes.
  • Review your policy to ensure you’re adequately covered – Homeowners policies provide approximately 50 to 70 percent of the amount of insurance you have on the structure of your home. If you rent, know that your landlord’s insurance will only cover the structure of your home—you need a renters policy to protect your possessions against loss or damage.

Make sure your policy provides enough coverage for additional living expenses

Additional living expenses (ALE) covers the extra costs incurred if you need to live elsewhere because your home is rendered uninhabitable as the result of a hurricane (or any other insured disaster). While your home or apartment is being repaired or rebuilt, ALE covers hotel bills, restaurant meals, etc.—expenses over and above what your customary living expenses would be at home. Generally, the ALE policy limit is 20 percent of the amount of insurance coverage on the structure of your home. Standard renters policies also provide for ALE.

  • Most insurers offer the option of higher coverage limits – Depending on where you live (which may dictate your expenses), you may want to consider a higher ALE.
  • ALE reimbursements may be limited to a specified amount of time – Make sure you’re comfortable with the time limits in your policy.
  • If you rent out part of your home, ALE coverage also reimburses you for lost rental income. Make sure your policy reflects the current amount of your rental income.

Insurance Claims and Irma FAQ

Courtesy of iii.org

In the aftermath of Hurricane Harvey and Hurricane Irma, policyholders may have questions about how insurance works following a natural disaster. Here are some answers to many of these common questions.


Q. Are flood losses covered under my homeowners insurance policy?

A. Standard homeowners and renters insurance policies do not cover flood damage, including damage from a storm surge. Flood coverage requires a separate policy from the federal government’s National Flood Insurance Program (NFIP), or from some private insurance companies.

More information about flood insurance.

Q. Is property damage from a storm surge considered flood damage?

A. Yes, it is?and, therefore, storm surge is covered by your flood insurance policy. A standard homeowners insurance policy does not cover damage from floods, such as flooding from a storm surge.

Q. What is the “official” definition of a flood? If there is only water on my property in my neighborhood, is that considered a flood?

A. Flood damage is caused by an overflow of inland or tidal waters and is defined as a general and temporary condition of partial or complete inundation of two or more acres and two or more properties of what is normally dry land. So if only one property is damaged, then that is not considered flood related.

Q. Is wind damage covered under my homeowners insurance policy?

A. Property insurance covers damage from windstorms, such as hurricanes and tornadoes, to the “residence premises,” whether it is a single-family home, a duplex where the policyholder lives in one of the units, or any other building where the policyholder resides as shown on the insurance declarations page. A standard homeowners policy also applies to attached structures, such as a garage or deck, and “other structures” that are unattached, such as a separate garage building or shed and swimming pools. The policy includes coverage for damage to contents.

More information about homeowners coverage.

Q. Does my renters insurance cover damage from wind?

A. A renters policy covers personal belongings that are damaged by wind from the storm. Damage from flooding may be covered under some, but not all, renters policies. A separate renters flood policy can be purchased from the NFIP. Damage unrelated to your personal possessions, such as part of the apartment’s structure like the walls and floor, is covered under the building owner’s policy.

More information about renters insurance.

Q. I live in a condo. Am I covered for wind damage to my unit?

A. If you have purchased a co-op or condominium policy for your apartment or townhouse, you are covered for damage to the interior space of your home. The condo association’s insurance might have coverage for your fixtures, wiring or plumbing, or it may only provide coverage from the “bare walls” and not what is behind them. You can obtain a copy of the master policy to better understand what is covered.

More information about co-op/condo insurance.

Q. My car was flooded in the storm. Is it covered?

A. Flood damage to vehicles, including flooding from a storm surge, is covered if you have purchased comprehensive coverage, also known as “other than collision” coverage, which is optional with a standard auto policy. Four out of five drivers choose to buy comprehensive coverage.

More information about auto coverage.

Q. If I make temporary repairs to my home, will I get reimbursed?

A. Yes. Do not wait until a claims adjuster arrives to make temporary repairs that will prevent further damage. Most insurance policies will reimburse you for the expense of making such reasonable and necessary repairs, up to a specified dollar amount. In fact, most policies require you to take these preventive steps. Be sure to save all the receipts from purchases related to your repairs so you can be reimbursed.

Q. The power went out during the storm and food in the refrigerator and freezer were spoiled. Is that covered?

A. Following a hurricane, some insurance companies may include food-spoilage coverage, usually for a set amount that can range from $250 to $500 per appliance. Check with your insurance professional.

Q. I have a percentage deductible for hurricane damage. How do I know what my out-of-pocket costs are?

A. The declarations page of your insurance policy details the exact dollar amount of your hurricane deductible. Whether a hurricane deductible applies to a claim depends on the specific “trigger”, which can vary by state and insurer and may be linked to wind speeds.

More information about deductibles.

Q. Should I file a claim if the damage is less than my deductible?

A. Yes. Sometimes there may be additional damage that becomes evident in the months following a significant storm. Filing a claim, even if the damage total is under your deductible, will protect you in the event further repairs are needed. And if your home suffers damage from more than one storm in a single season, the damage from the first storm may apply toward the deductible amount.

Q. My home was not damaged, but can I file a claim for the large tree that fell in my yard?

A. Homeowners insurance policies do not pay for removal of trees or landscaping debris that did no damage to an insured structure. If a tree hit your home, that damage is covered; if your tree fell on your neighbor’s home, his or her insurance company would pay for the damage. However, if the felled tree was poorly maintained or diseased and you took no steps to take care of it, their insurer may seek reimbursement from you for the damages.

More information about trees and insurance.

Q. My home is uninhabitable. How can I cover temporary living expenses?

A. Most homeowners and renters policies cover additional living expenses?any costs over and above your customary living expenses?when you are displaced from your home by a covered loss (such as wind damage) and need temporary shelter. The amount is generally 20 percent of the total insurance you have on your home. Some insurers pay more than 20 percent; others limit additional living expenses to an amount spent during a specific time period. Keep all your receipts to document your expenditures.

Q. If I evacuated due to the storm, are my evacuation expenses covered?

A. Generally, expenses related to evacuation are only covered if there is also damage to your property. This is because the coverage is part of the property policy.

Q. I’ve heard that Texas has a new law that affects prevents me from filing a lawsuit in a claims dispute. Is that true?

A. No, it is not. Texas law has strong protections for consumers, and those protections remain in place. A law that will effective Sept. 1, 2017 (HB1774) simply requires that an insurance company be given written notice of legal action before a lawsuit is filed. It does not bar any individual from having access to the courts nor does it prevent consumers from seeking legal counsel.

Q. Advertisements and social media traffic are suggesting that I need a lawyer or public adjuster. Do I need to hire someone to help me with my claim?

A. You have a right to hire outside claims help; however, be aware that it comes at a cost as public adjusters are paid a percentage of your claim and legal assistance is often charged at an hourly rate. The insurance premiums you pay include the services of a claims adjuster when it comes time to file a claim. Their job is to serve you and help you recover and rebuild?if you’re not satisfied with the results, you can contact the claims manager. Every natural disaster gives insurers an opportunity to do their best for you, and that should be your expectation.

Money Raised for Hurricane Harvey by Insurance Industry

Courtesy of iii.org

In addition to settling insurance claims the insurance industry is also strongly committed to raising charitable funds for victims of Hurricane Harvey.

The Insurance Industry Charitable Foundation (IICF), a nonprofit organization that unites the insurance industry in helping communities and enriching lives through grants, volunteer service and leadership, has established a Hurricane Harvey Disaster Relief Fund to assist victims affected by this catastrophic storm.

Within 24 hours of establishing the IICF Hurricane Harvey Disaster Relief Fund, nearly $80,000 has already been committed by those in the insurance industry. John Vasturia, President, Specialty Markets, Munich Reinsurance America and IICF Board of Governors Chair, noted that, “Through IICF, we are able to very quickly unite our efforts in collecting donations, and distribute to local nonprofits in the Texas communities who will be able to help families across the region in a very real and meaningful way.”

IICF will collect and report on the total of all donations made through this fund, and forward 100% of these insurance industry contributions to the local nonprofits assisting victims in the area, including the American Red Cross and specifically its Hurricane Harvey disaster fund. Donations can made by clicking here.

The USAA Foundation, Inc. has pledged to assist the Hurricane Harvey rescue and recovery efforts with a $1 million grant. In addition to the grant from the Foundation, USAA introduced a donation program for its 32,000 employees worldwide, committing to matching their contributions, dollar for dollar, up to a total of $150,000. That total was met in less than six hours, so the matching grant was boosted Wednesday to $500,000, raising the potential contribution from USAA and its employees to at least $1 million, on top of the $1 million pledge from The Foundation.
Other insurance companies that are raising funds for Hurricane Harvey victims include: The Nationwide Foundation, which is giving $500,000 to Red Cross Disaster Relief and State Farm which is matching employee donations through its Matching Gift Program.

If you work for an insurance company or trade group that is raising funds for Hurricane Harvey victims please let us know about it by emailing marias@iii.org