During the months of March through August, hundreds of tornadoes form over the United States. While most tornadoes that strike during tornado season cause little to no damage, a few tornadoes are responsible for significant or total losses to American businesses each year. In 2013, an estimated five billion dollars in insured losses were caused by tornadoes over a three-day period. To protect against tornado damage, businesses should carefully examine their existing coverage and purchase additional policies, if necessary, to fill any coverage gaps.
Under most circumstances, commercial property insurance will cover the damage caused by any tornado. Businesses located in Tornado Alley should strongly consider purchasing enough coverage to compensate the owners for a total loss. The right policy should cover the value of the property, inventory, equipment and other important business assets. Companies should also look for policies without “anti-concurrent causation” clauses. These clauses can allow insurance companies to deny a claim if an excluded event or peril is partially responsible for damage that happened during a tornado.
Comprehensive commercial auto insurance will cover vehicle damage caused by tornadoes. Although the cost is higher than other types of commercial auto insurance policies, comprehensive coverage is essential for businesses with large amounts of capital invested in its vehicles. For businesses that aren’t interested in comprehensive coverage, a specified causes policy may also be offered by their insurance company. This type of policy would offer coverage if tornado damage was specifically named within the policy.
Seasonal businesses that rely on revenue during this season are particularly vulnerable. For this reason, business interruption insurance is highly recommended for these types of companies. Even if the business operates year round, a large tornado could cause so much destruction that it could take six months or more to completely rebuild. Business interruption insurance should cover the loss of income or earnings until operations can resume.
Companies that have large clients, primary suppliers or important business partners located in Tornado Alley, may also want to consider purchasing contingent business interruption insurance. This type of policy provides coverage in case a business is indirectly affected by tornado damage. For example, if a primary supplier can no longer deliver promised raw materials, contingent business interruption insurance would help cover the company’s loss of revenue while it locates a different supplier.
Tornado season is associated with warm weather, but tornadoes are spotted year round in the United States, especially in Texas where the weather is so unpredictable. No matter what time of year, it’s important that a business has the correct coverage to protect against possible tornado damage. Each policy has its own restrictions on the timetable, scope and dollar amount it will cover, so it’s important to discuss commercial tornado coverage with a knowledgeable agent.
If you are unsure of how to determine the coverage you need for your business, call CapCity Insurance Services at 512-222-8805 to speak to an independent insurance agent about Austin Business Insurance.