We are already well into the Atlantic hurricane season, which runs from June 1 through Nov. 30. Peak activity for Connecticut and the rest of New England traditionally occurs from mid-August through mid-October, which makes now an excellent time to review your business insurance in Connecticut. This article aims to help small business owners determine how well their current business insurance coverage will actually pay the bills in the event of a storm that shuts down operations.
Geography does not protect businesses in Connecticut from hurricane losses. Even when business operations are far from the coast, they can still face wind, prolonged power outages, heavy rain, and inland flooding that can have a devastating impact on the business.
Commercial property insurance provides a solid foundation, but it is not a comprehensive continuity plan. It may pay to repair covered physical damage, but it excludes lost income, ongoing expenses, and extra costs needed to keep your business running.
What Commercial Property Insurance Actually Pays For
Picture a machine shop where tropical-storm winds rip off part of the roof. Rain enters, damaging machinery and inventory. If wind is a covered cause of loss, your commercial property policy can cover roof repairs and damage to business property. However, this claim will be subject to your deductible, policy limits, exclusions, and other conditions. This is the kind of scenario that drives up higher premiums and higher deductible decisions for Connecticut businesses weighing their coverage options each renewal.
While this policy addresses property damage, it doesn’t cover the loss of income when your business cannot operate due to machinery being out of service, unfilled orders, or unpaid invoices at the start of the week.
Business Income/Interruption, Extra Expense, and Civil Authority Coverage
During a temporary business closure, commercial insurance buyers need business income coverage because payroll, rent, taxes, and loan payments continue even when operations stop.
- Business income/interruption coverage can reimburse lost net income and ongoing operating expenses when your business halts operations due to covered property damage. It applies only if the shutdown results from a covered cause of loss.
- Extra expense coverage addresses a different issue: What if spending money now can reduce the ultimate size of the claim by keeping your business operating? For example, a manufacturer might rent temporary space and equipment, or an office might relocate staff. If these extra costs help you continue operations or shorten the shutdown, the policy may cover them, subject to its terms.
- Civil authority coverage may apply if government action blocks access to your premises because nearby property suffered covered physical damage. This coverage does not apply every time a road closes or an evacuation is ordered. The policy will set requirements for the cause of damage, distance from your property, waiting periods, and the duration of coverage.
The cause of loss determines whether business income/interruption coverage applies. For example, if a covered peril, such as wind damage, forces a shutdown, coverage can replace lost revenue. However, if flood damage, which can affect inland areas, is the cause, the Connecticut Insurance Department confirms that it is excluded from coverage in standard policies.
Closing that gap requires a separate flood policy. The National Flood Insurance Program offers commercial coverage up to $500,000 for the building and up to an additional $500,000 for business personal property, available whether or not the property sits in a mapped high-risk zone. NFIP coverage doesn’t extend to lost income or extra expense from a flood-related shutdown, though, so businesses that want that protection typically need to add it through a private flood policy or excess coverage layered on top. Given how often Connecticut’s hurricane and tropical storm remnants bring inland flooding along with wind, flood coverage deserves a place in the same conversation as your property, business income, and umbrella review.
Where Business Umbrella Insurance Fits In
Storms can also create financially disastrous liability exposures.
After a storm, damaged signs, debris, and slippery entrances can lead to bodily injury, third-party property damage, medical bills, and lost wages claims. These third-party claims fall under your general liability coverage, not your commercial property policy, and can carry steep legal fees if your business is held liable.
Business umbrella insurance offers another layer of liability coverage above your scheduled underlying policies, such as general liability and commercial auto. If a covered claim exceeds the underlying policy limit, the umbrella can respond, subject to its own terms and exclusions.
Choosing umbrella limits requires data-backed consideration. We will work with you to take into account your customer traffic, vehicle use, contracts, premises exposures, the severity of a potential liability claim, and what you require to protect against it.
Build a Business Continuity Plan Before the Next Storm
A hurricane insurance review should answer these questions:
- What pays to repair property damaged by a covered cause of loss?
- What replaces income or pays necessary extra expenses during a shutdown?
- What happens if a liability claim exceeds the underlying policy limit?
The answers will differ for each business. Some business owner policies (BOP) include business income/interruption coverage based on actual loss sustained for a set period. Larger commercial policies may require you to set a specific business income limit using a worksheet.
Before hurricane season peaks in the Constitution State, small business owners should explore coverage options across property, business income, extra expense, civil authority, flood, and umbrella coverage to find customized coverage options that actually protect their business. Contact our team at Brooks, Todd & McNeil. Our experienced agents can help you identify where a long storm-related shutdown could leave gaps in your insurance program and design a plan to close them.
FAQ About Hurricane-Related Damage
Does business insurance cover hurricane damage in Connecticut?
It can. Coverage depends on what caused the damage and the policy terms. Wind may be covered under commercial property insurance, while flood generally requires separate coverage.
What’s the difference between business interruption and commercial property insurance?
Property insurance addresses covered physical damage. Business income/interruption coverage addresses qualifying lost income and continuing expenses resulting from a covered shutdown.
Do I need business umbrella insurance for my small business?
It depends on your liability exposures and existing limits. An umbrella can provide additional limits when a covered liability claim exhausts applicable underlying insurance.
How long does business income/interruption coverage last?
It depends on the policy. Some BOPs provide actual loss sustained coverage for a particular period, while other commercial policies use a stated business income limit and applicable period-of-restoration provisions.
About the Author
Stephen G. Todd, CPCU CIC is owner, President and CEO of Brooks, Todd & McNeil, bringing more than three decades of experience across underwriting, claims, and agency leadership. He began his career with Travelers Insurance Company, where he held roles in Home Office Finance, National Account Claims litigation, before serving as a commercial lines underwriter with American States Insurance Company. Since joining Brooks, Todd & McNeil in 1991, Stephen has led key operational areas and helped drive innovation, including the development of the insurance industry’s first real-time personal lines comparative rating system. A recognized industry leader, he has served on numerous carrier advisory councils and remains actively involved in both professional and community organizations.
About Brooks, Todd & McNeil
Since 1839, the independent agents at Brooks, Todd & McNeil have been pleased to offer our community policies from a variety of providers. To learn more about our products and services, contact us today at (800) 448-4567.