Protecting Your Company from a Catastrophe

Hurricane season is here, and while it’s always important to have enough insurance to recover from a natural disaster, the stakes are even higher in today’s economic climate.

With models projecting higher catastrophe losses, businesses—especially those near the coast—can expect double-digit increases in insurance rates. Insurers are offering less capacity after taking hits from 2008’s natural disasters (the third costliest on record) and big investment losses.

Reducing coverage to save money could be a mistake. Rebuilding costs surge after a disaster, and shrinking profits and tight credit leave many small businesses with little financial flexibility. How can you ensure your company has the right amount of coverage at the best rates?

1. Know your exposures. Mapping and modeling technology are required to thoroughly evaluate the locations, construction, values and loss potential from hazards such as wind, flooding, storm surges, tornadoes, and earthquakes. Typically the better the building and loss history, the better the rate. Properties with lower risk of damage, such as steel-frame or concrete buildings, may see stable rates.

2. Survey the market. Make sure your agent has access to many insurance markets and knows what kinds of properties different underwriters want to cover. Financial strength and reputation for fair claims practices are as important as price.

3. Consider changes. Hurricane safety improvements and higher deductibles could reduce premiums. If your business has catastrophe risk, a thorough risk evaluation and broad market access yield more competitive quotes. Some agents work with property insurance specialists for these services.

Catastrophe coverage is a critical investment. Invest wisely to keep a natural disaster from creating a business catastrophe.

David Pagoumian Chief Executive Officer NAPCO Iselin, N.J.

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