Most commercial property insurance policies offer coverage for both the cost of repairing your damaged structures and the expenses related to removing debris from the disaster.
Cleanup includes everything from building materials to business personal property destroyed inside your premises to automobiles, signs, and the belongings of employees and guests. But there are important restrictions on this coverage that you should understand. Some of those limits could result in substantial out-of-pocket costs to you.
Standard debris coverage may be inadequate
Debris coverage is typically included in a standard commercial property policy as a percentage of the overall recovery for the damaged property plus your deductible — 25% is a common amount. So, for example, if you have a $500,000 loss and a $1,000 deductible, your policy would cover 25% of $501,000 or $125,250. That may sound like a good amount, but keep in mind that when there is widespread damage to a community or hazardous materials involved, local costs to remove debris in a timely manner can skyrocket.
Your insurer may include a clause that provides a conditional $25,000 extension of coverage if the costs of debris removal outrun your coverage, and it may be possible to buy more. If you are in an area susceptible to natural disasters, it may be particularly important to discuss extra debris removal coverage.
Special concerns
Even if you can keep debris removal costs within your coverage limits, there are special situations that could fall outside your policy terms. These would nullify insurance protection in certain circumstances.
Pollution
While most commercial property policies contain an exclusion regarding the release of pollutants into the environment, it doesn’t apply if a covered peril caused the discharge. For example, if a windstorm caused chemicals to spill, cleanup of those pollutants would be covered.
That said, most policies will not cover the expense of removing pollutants that have leeched into water or underground sources. If your company handles environmental hazards, such as fuel, fertilizer or chemicals (to name a few), you may need special coverage: pollutant cleanup and removal. Though limits of insurance on this are typically pretty low, it may save you thousands of dollars at claim time.
Debris of others
In some disasters — especially tornadoes, hurricanes, gas line explosions and wildfires — debris from other properties is carried onto your premises. While newer commercial property insurance forms include costs of removing debris, there are exclusions to consider. The debris must be carried there by a peril insured under your property policy and be items covered by your policy. Also, it must affect a portion of your property included in (and covered by) your policy.
For example, a hurricane might be covered under your policy but be accompanied by flooding that (a) washes vehicles onto your damaged property and (b) isn’t covered by your insurance because you never bought flood insurance.
Talk to your JAISIN insurance professional about these details. There are other examples where debris might be excluded from your insurance, so get clarity on where you have gaps and what you can do about them.
Property not covered
Some debris simply falls outside the terms of your commercial property policy. Take trees, for example.
Imagine there is a windstorm and your building loses a roof and suffers substantial water damage, but most or all of the debris is inside your building. On top of that interior damage, a few very large trees have fallen across your parking lot but have done no damage to the property named on your policy. The removal of those trees might not be paid for by standard insurance coverage.
Delayed reopening due to debris
In large-loss scenarios or widespread disasters in your region, there may be delays in clearing your lot and getting repairs underway. How does your business income insurance respond to that? Do you have the right coverage — such as business income with extra expense — to allow you to find other accommodations to keep your company operating?
Co-insurance penalty
You are responsible for keeping the value of your policy aligned with the value of the property you wish to have insured. If you fail to do that, you could be subject to a co-insurance penalty, which reduces the maximum payout you can receive.
That reduction will also affect your coverage for debris removal since coverage is typically a percentage of your total recovery. Underinsuring your commercial property is a dangerous thing to do, so make sure you get accurate appraisals of both your building and business property at each policy renewal.
Talk to your insurance advisor
In some cases, other parties might be involved in your property insurance considerations. These might include a landlord, tenants or even a local government. Any contracts to which you are a party or local regulations compliance should be a part of your insurance-buying process.
Your JAISIN insurance professional can help you dovetail all the requirements you face with your coverage protections, so provide them with as much information as you can. Though debris coverage is only one component of a broad commercial property policy, getting it wrong can be very costly, so call or email us today.
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