2020 will be remembered as the year the world stopped because of COVID-19. However, the U.S. also registered another disheartening record: by the end of September, the country had experienced 16 natural disasters that caused at least $1 billion each, tying the previous record set in 2011 and 2017 with three months of the year left to go.

Understanding Business Insurance Coverage for Extreme Weather and Natural Disasters

For business owners, this statistic can be frightening. In addition to ensuring your own safety, you have to ensure the safety of your business and employees against extreme weather conditions and natural disasters.

If you’ve never thought about it until now, it’s a good time to assess the vulnerabilities of your business and assets (including vehicles, inventory, and supplies). What security measures do you take to protect your facilities? What if you need to stop work because your property was damaged or destroyed? Do you have the appropriate insurance coverage?

When a Natural Disaster or Fire Closes Your Doors

Many businesses have emergency plans for evacuating or taking shelter during extreme weather events. But what happens in the aftermath if the business can’t reopen? For example, an earthquake can interrupt your business by leaving the building without electricity or internet, and a flood can block the road on which you transport your products.

Business interruption insurance is the coverage that helps to replace lost revenue if your professional activity is interrupted because of damages caused by certain natural disasters or fires. Coverage varies by the insurance company but usually involves:

  • Refund for lost profits
  • Refund of fixed costs
  • Employee salaries
  • Taxes
  • Payment of loans
  • Costs of moving to another temporary location
  • Replacement of machinery
  • Employees training
  • Extra expenses for the business to continue operating during renovations

It’s recommended that you search records of occurrences in your geographic area, be up to date on forecasts for future disasters, and use this information to determine what forms of small business insurance can protect your company in the event of extreme weather and natural disasters.


According to data from the U.S. Geological Survey, at least 16 major earthquakes are expected annually. There are areas of most significant risk, close to geological faults or in a state with earthquake history (such as California), that require specific insurance against this type of disaster.

In other regions, commercial property insurance usually covers some natural events, but earthquake protection needs to be purchased separately. Earthquake insurance covers damage to the company’s building and inventory. Some policies also include loss of commercial income. If your company is located in one of the risk areas, the coverage will cost more.


According to the National Fire Protection Association’s latest data, local departments responded to an estimated 1.3 million fires in 2019. These disasters caused approximately $14.8 billion in material damage.

Some business insurances often offer fire insurance as part of a commercial property policy. It’s recommended coverage because flames, smoke, and heat can damage the property and equipment and seriously injure your employees. Even fire-fighting materials (such as water and chemical foam from extinguishers) are capable of causing considerable material damage.

A company that doesn’t have fire insurance will have to pay for all these repairs out of its own pocket.


In some circumstances, businesses can somewhat prepare for flooding. For example, you will have some time to move your company’s equipment and vehicles to higher places or identify possible evacuation routes.

But the building will remain subject to water damage. In this case, commercial flood insurance helps protect your company’s physical location and its internal content. You may need to obtain the coverage separately, and it protects electrical and hydraulic systems, furniture and appliances, physical structure, fuel tanks, solar equipment, etc.


In 2020, Hurricanes Laura (in August) and Sally (in September) left a trail of destruction in different states. These two events caused about 50 deaths and nearly $30 billion in damage.

The bad news is that there’s no specific insurance for hurricanes, only separate policies for the two biggest consequences of a hurricane: floods and windstorms. So if your business is in an area prone to hurricanes, you should purchase these separate policies to cover possible damages.


Landslides are caused by erosion or by the accumulation of water in a given area. These events destabilize the land and cause landslides, which can bury your company’s building or at least damage it considerably. Like earthquakes, landslides are not included in standard policies, but some insurances offer complete coverage for landslides and mudflow.


Some people confuse tornadoes with hurricanes, as both produce powerful, swirling winds. But a tornado is generally smaller and lasts less time, although it can still cause considerable damage. According to data from the National Centers for Environmental Information (NCEI), in 2020 there were 1,053 preliminary tornado reports.

In this case, the damage is usually covered by commercial property insurance. Coverage includes property, equipment, and inventory. Whenever there’s a tornado alert, you can help protect your property by covering external doors and windows and turning off electricity, gas, and water.

Never Underestimate Nature

Some business owners don’t understand the potential for destruction and damage until they experience a natural disaster for themselves, but that’s no way to protect your business. Never underestimate nature.

In addition to purchasing the right insurance policies, you should also raise awareness and educate your employees to help them understand the risks and know how to react in these situations.