MIAMI—National Hurricane Preparedness Week just passed us by but that doesn't mean you can't take precautions to safeguard your commercial real estate. Now is the time to develop an evacuation plan, assemble disaster kits, strengthen business structures, triple-check your insurance coverages and make sure you have the right insurance coverage in place.

“We're predicting seven to 10 named tropical cyclones forming in the Atlantic this hurricane season, with four of these intensifying into hurricanes,” says Jill Hasling, president of the Weather Research Center. “Given this forecast, now is the time for homeowners and business owners to evaluate the condition of their properties and take the necessary steps to prepare for severe weather.”

How Much Insurance Do You Really Need?

“How much” is a key question for commercial real estate owners, especially those in the high-risk storm areas like Florida and the Gulf Coast States. Unfortunately, there's no blanket answer. According to Robert Grand, vice president of risk management at CBIZ, the amount of insurance coverage a commercial real estate developer needs is dependent on a number of factors.

“Replacement cost values, loss of rent figures and even construction material costs all impact coverage needs,” Grand tells GlobeSt.com. “A thorough review of your exposures is needed to effectively determine coverage. Ideally, all real property and business personal property should be insured for replacement costs with no applicable coinsurance. Loss of rents should be valued based on the actual loss sustain for terms for 12 to 24 months. And you should always have coverage for ordinance and law and increased cost of construction to protect you from demand surge material and labor costs.”

Peter Fallon, senior vice president at Risk Strategies Company, tells GlobeSt.coM catastrophe modeling for natural perils like flood, storm surge and hurricanes can help commercial real estate developers and owners determine what their potential losses may be by location and in the aggregate over multiple locations to modeled events.

“The modeling output will help developers and owners understand their exposures, what can be done to mitigate their exposures through property loss prevention and control measures and how much insurance to buy to protect their assets,” Fallon says. “Flood, storm surge and hurricane insurance is limited in exposed areas such as the Gulf Coast and Eastern Seaboard. Modeling can help developers and owners 'sell' their risk to underwriters, through their brokers, to maximize the amount of available insurance at a reasonable cost.”

Owners should take no chances, says Greg Matus, regional managing partner at Franklin Street in South Florida. “We had clients buying properties the week that Erika may have arrive and we suggested to them that they should bind their policies early,” Matus tells GlobeSt.com. “The rule that many private companies follow is that once a hurricane declared in in a region, they will not bind policies, add riders or other coverage, or issue a renewal if there has been a lapse in coverage. So, if you're in the process of closing on a commercial property, lock in your insurance now so you can ensure coverage.”

Natural Disaster Pros Sound Off

Again, now is the time to prepare for a natural disaster. Consultants can help you do your research ahead of time and develop an emergency response plan. For example, don't wait for a hurricane before you know what roofing contractor or restoration company you're going to call.

“A big, bad windstorm brings a lot of chaos and demand surge for emergency services that test the limits of the contractors and vendors who are best experienced, equipped and available to respond,” says Grand. “If you don't have these relationships in place before a storm, you will quickly find yourself with a sub-par roofing contractor and less than capable restoration company.”

Likewise, you need to know ahead of time what you will do when all the windows are blown out of your buildings. You should have a plan for these scenarios already in place so you can react and activate your catastrophic response team as soon as the wind leaves town.

“You may want to invest in a generator so you can prevent power interruptions,” says Grand. “Keep your insurance policies in a safe place, as well as your tenant contacts and professional service contacts. Seasonally promote best practices about emergency response planning with your tenants to minimize their risk of going out of business and leaving you with loss of rents.”

Some of the most common mistakes a property or business owner can make are not having enough, or any coverage for certain items such as flood, the increased cost to repair a property due to the enforcement of a building code or, loss of business income. Michael Higer, a partner with Berger Singerman, tells GlobeSt.com many property owners are also caught off guard by their hurricane deductible which can be in excess of 2% of the total policy limits. For many commercial property insurance policies, hurricane deductibles can exceed $100,000.

“If you own a business, take the time to identify the critical functions of your business and create a plan to implement those functions in the event of a hurricane,” Higer says. “The plan should address crisis communications, key personnel, access to funds, information technology and the minimum requirements to keep your business running. You should also test the critical functions of your business that are most vulnerable during a hurricane including servers, workstations, network, building security, phones, supply chain, staff procedures, and so on.”

Click here to view our full coverage on disaster risk and recovery for Hurricane Season 2016.

How Much Insurance Do You Really Need?

Natural Disaster Pros Sound Off

Click here to view our full coverage on disaster risk and recovery for Hurricane Season 2016.

Instant Insights /

Insurance Gurus and Consultants Offer Hurricane Preparation Wisdom

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