Does Your Building Insurance Cover Natural Disasters?

As climate change intensifies and extreme weather events become more frequent, you may be wondering: Does my building insurance coverage offer the 360-degree protection I need?

While many commercial property policies offer basic coverage against natural disasters, others have coverage gaps that could leave you vulnerable. To ensure you’re protected, let’s explore what’s covered and what isn’t under most commercial property building insurance policies.

Standard Building Insurance Coverage

Most commercial property building insurance policies cover the physical building and the property it sits on. Typically, a policy extends coverage to buildings, structures, fixtures, garages, and fences that were damaged by:

• Fires
• Storms
• Theft
• Vandalism

Common Building Insurance Coverage Exclusions

Despite the comprehensive coverage above, commercial building property insurance policies often have exclusions—events not covered under a basic policy. These exclusions typically include:

• Earthquakes and flood damage (Standard policies exclude these natural disasters. A Difference in Conditions (DIC) policy can help bridge this coverage gap)
• General wear and tear over time
• Pest damage
• Mold
• Pollution cleanup
• Intentional damage by the policyholder
• Certain types of water damage, like sewer backups
• Vacant buildings, depending on how long the property has been unoccupied
• Mobile equipment and tools
• Properties under construction or major renovation

Filling In Coverage Gaps: Additional Coverage

To protect against these common exclusions, you may want to consider additional types of building construction insurance, including:

Difference in Conditions Insurance (DIC)

DIC insurance fills in coverage gaps, offering additional protection against natural disaster events like earthquakes, floods, landslides, and water damage. It’s important to note that DIC policies are supplemental and do not replace standard building insurance coverage.

Contractor’s Equipment Insurance

Unlike building insurance coverage, this policy protects clothing, tools, and even borrowed equipment. It’s what we commonly refer to as a “floater policy,” meaning it moves with the covered equipment, offering protection regardless of location.

Additionally, contractor’s equipment insurance covers the cost of replacing or repairing damaged tools, supplies, or any other equipment required to complete the job.

Contractor’s Insurance

This comprehensive package is unique from contractor’s equipment insurance in that it covers liability exposures—things like:

• Bodily injury to clients
• Property damage to a client’s existing structure during work
• Claims triggered by problems that arise after project completion
• Errors and omissions in design or consulting

Contractor’s insurance also provides coverage for:

• Property in transit
• Employee dishonesty
• Specialized endorsements like waiver of subrogation (an agreement that prevents insurance companies from seeking reimbursement from third parties)
• Bid and performance bonds—guarantees that you’ll fulfill contract agreements
• Per-project aggregate—separate coverage limits for each construction rather than sharing one limit across all projects
• Residential construction coverage

Builder’s Risk Insurance

Whether you are a property owner, contractor, or architect, builder’s risk insurance protects you from loss during construction or remodeling. These policies typically cover weather damage, fire, natural disasters, theft, vandalism, and damage due to faulty design or materials.

Building Insurance Coverage That Works As Hard As You

We can't predict the future, but we can certainly help you plan for it. Whether you are a contractor, architect, or a stakeholder in a commercial or residential project, you need protection and peace of mind. That's what Hoffman Hanono offers. For over 60 years, we've helped San Diego builders avoid costly delays and financial setbacks through customized builder's risk coverage. Contact us today!