Different regions of the US mean different risks, from flooding to tornadoes to earthquakes. How much insurance is too much? NMG Risk Solutions president Dan Russo explains…

Hotel Owners: It was a risky venture when you bought that hotel property, securing that big mortgage. It was a risky venture when you decided to be an entrepreneur, assuming the necessary business risks in owning and operating a hotel property rather than being an employee for someone else. In return for these risks, investments, and hard work, you anticipate rewards. Not immediately, but certainly over time; for you, your family, as well as future generations to come. We all know that real rewards don’t come without real risk. Once achieved, don’t risk these rewards -- gambling everything you and your family have worked for, on a one-time loss event.

It’s time to take notice and educate yourself on the risks hotels inherently face, as well as your individual risks based upon your specific property and
local. Insurance can’t cover it all, but the right coverage, determined by a weight and measure of your risk, can certainly cover a large portion of these risks. The balance can be reviewed and other Non-Insurance measures that can be taken or implemented to reduce your overall exposure to risk.

Tornadoes in Mississippi, flooding in Tennessee, an oil spill on the Gulf Coast. Looming concerns include the upcoming hurricane season, the every day fire and water exposures, and other natural disasters. As you know, you can‘t always dodge the bullet, but you can be prepared. Be prepared, be knowledgeable and know your risk -- weighing it against the cost of protection.

In every major catastrophic event there are the Do’s and the Don’ts. The Do’s are the people who weather the storm and survive. They have evaluated their individual threshold of risk, have transferred this risk via insurance products and have taken proper action to reduce the exposures that are not insured by implementing other risk management techniques. The Don’ts have no insurance, are underinsured or they drastically cut their insurance coverage to save money on premiums. The Don’ts find themselves with restricted, limited or excluded coverage, or coverage subject to a co-insurance penalty.

Most insurance policies exclude flood coverage. Twenty-five to 30 per cent of all flood claims occur in non-flood zones. Flood zones are determined on a 100-year flood mark; therefore it is always possible, even though not as likely, that you will suffer a flood loss. The premium is significantly lower when you are not in a flood zone. You should also know that the Statutory NFIP limit for General Property or Commercial Property is $500K Building/$500K Contents. It is available to all -- you can even purchase excess flood coverage through to cover your full flood risk exposure.

While your exposure to earthquakes may be limited, the risks are real – and most standard polices exclude earthquakes. You should know if you are close to a fault line. If you are, make the necessary arrangements to insure against this peril, even if coverage is subject to a large deductible, to avoid incurring the full loss amount. The farther away you are from the fault line, the lower the coverage premium cost. The off-premises power option is only applicable to covered causes of loss. If power is lost as a result of an earthquake and it is not a covered cause of loss, your off-premises power interruption coverage will not respond.

Exposures to terrorism are looming in all major inner city locations, and unfortunately are a daily threat on society, as well as to your business. You must weigh your risk exposure on an individual basis. The exposures and loss amounts can be catastrophic on multiple levels, even if you do not suffer a direct loss. The impact on a region exposed to a terrorist event can also affect you greatly. Understand your exposure, identify the cost of coverage, weigh your options and make an educated choice.

If you could purchase insurance to cover all of your risk exposures, you would most likely be ‘insurance poor’. Rather, develop an understanding of your individual daily and catastrophic risk exposures and be proactive toward
risk management. Take the necessary actions to avoid or reduce known loss exposures before a loss occurs. Apply certain risk management techniques. Some will bear a cost, while others may be at no cost. Prioritize your risk based on exposures and the potential frequency of those exposures, as well as the potential cost of that exposure. Utilize your insurance professional to advise and consult you on the risks you face; then insure or transfer the amounts of these risks you cannot self insure, using the tools that are available. If these resources are not currently provided to you, then seek others who can provide them for you – it’s your money.