Insurance Considerations to Focus On In Light Of The Recent Winter Storms

The images linger in our memory of the streets of Dallas covered in snow after a raging winter storm slammed the city. Images of snowed-in shops and stark-white streets filled the news only a few weeks ago. Reports say that this year’s winter storm could be the most expensive weather event in all of Texan history. Temperatures dipped to all-time lows in decades and a weather warning was delivered to all 254 counties. Power grids failed and homes and businesses lost electricity, heat, water, and other amenities. While this was in the news because it took place, unusually, in Texas, we on the East Coast are no strangers to such freak weather events. 

Large-scale winter storms cause as much damage as violent hurricanes. Storms have lower wind speeds but their fronts can be more than 1,000 km long and sweep across half a continent. With such power, it’s no surprise that winter storms can cause large-scale damages. The only thing more damaging would be the after-effects of a severe thunderstorm.

What do you need to keep in mind to protect yourself from the next one? Read on and find out.

Damaged Buildings

In such intensely freezing weather, it’s common for homes to get damaged due to power failures, electronics short-fusing, and food spoiling. A standard policy covers food that went bad due to a power outage. Many don’t realize their pipes are damaged until the ice melts and water starts running once more. The best precautionary action would be for home-owners to check their water shutoff valves to safeguard themselves against leaks. Homeowners should take this recent situation as a sign to insure their homes. Many standard insurance policies cover burst pipes and general damage that occurs during a winter storm. This isn’t always the case with hurricanes or tropical storms.

Infrastructural Damage

According to media reports, the recent storm left more than 2 million Texans without power. Many residents faced power outages that lasted several hours. ERCOT experienced a loss of power generation. According to Dan Woodfin, who oversees systems operations at ERCOT, said, “In addition to high demand, ERCOT has experienced a loss of generation. That’s due to gas supply, wind turbines icing over and generators tripping offline overnight.”

Without power, one can’t run kitchen appliances such as the washing machine or dishwasher. For businesses, this hurts material stored under controlled conditions. House heaters would also be rendered non-operational – a dangerous thing at single-digit temperatures. Additionally, the railway came to a stop, as did the Dallas Street Car. Infrastructural damage can be debilitating and impact every single aspect of our lives.

Vehicular Damage

Falling trees and other such dangerous occurrences can damage cars, boats, and other vehicles. Most comprehensive insurance covers damage while the vehicle is parked and a disaster occurs. There’s specific collision insurance for damage that happens while driving. For example, if the vehicle hits a fallen tree, or crashes while sliding on ice.

Loss to Businesses

Business interruption losses increase during such events. Snow and other elements cripple infrastructure, which impacts businesses negatively. But business can apply for first-party coverage that includes the following:

1.     Property Damage

This covers damage to, or destruction of, insured property caused by an insured peril. Insured property usually includes buildings and other structures, equipment, supplies, and other personal property. This coverage may include water damage caused by frozen/burst pipes or collapsed roofs.

Advanced payments can be expressly required under the terms of a commercial property policy. This can happen even if the full extent of the insured loss is still being investigated and adjusted. Such advance payments are important when a business can’t afford an extended adjustment period before receiving funds for repairs. It also helps to replace a lost stream of income.

2.     Business Interruption Coverage

This covers the policyholder’s loss of earnings or revenue resulting from property damage or loss caused by an insured peril. (Sometimes, disputes arise out of contention over the proper quantification of the loss under this coverage.)

3.     Contingent Business Interruption Coverage

This covers lost earnings or revenue, as a result of damage to property of a supplier, customer, or some other business partner or entity that leads to the inability of that supplier or customer to provide its goods/services to the policyholder or being unable to take the policyholder’s goods/services. This coverage is usually applicable even where the policyholder’s property has not been damaged.

Interestingly, this policy could also include attraction property coverage. This works when a hotel or restaurant suffers a loss of income as a result of damage to a designated “attraction property.” This includes a nearby sports venue, theme park, or convention center.

4.     Extra Expense Coverage

This provides coverage for certain extra expenses incurred as a result of a loss event to resume normal operations to the extent possible and/or mitigate other losses.

5.     Ingress and Egress Coverage

When the policyholder can’t access their business grounds or location, this policy gives coverage. For example, if the access roadway leading to the policyholder’s business has collapsed.

6.     Civil Authority Coverage

This covers the policyholder for losses stemming from a governmental authority’s order that interferes with normal business operations. This applies even if there’s no damage to the policyholder’s property.

7.     Service Interruption Coverage

If there are electric or other power supply interruptions that create losses for the policyholder, this policy provides protection. Often this coverage requires the outage to be the result of a damage event to the utility provider’s equipment within a certain distance of the policyholder’s property.

8.     Claim Preparation Coverage

This covers the policyholder for the costs associated with compiling, supporting, and certifying an insurance claim.

In light of recent events, it’s important for everyone – from home-owners to business owners – to prepare for future climatic interruptions. And obviously, insurance is the best safety net to protect you.