What small business owners need to know about wildfire insurance

What wildfire coverage do small businesses need?

Most small businesses can get the coverage they need fora wildfire with a business owner's policy, a package policy that covers commercial property, general liability, and business interruption insurance. If the business owns vehicles, commercial auto insurance provides wildfire damage coverage.

These coverages protect businesses from wildfire damage:

• Commercial property insurance: Commercial property coverage protects your building, inventory, equipment and other supplies against damages. If your warehouse burns down or your property has smoke damage, commercial property coverage comes into play. 
• General liability: General liability coverage protects against losses related to injuries that occur on your premises. For example, if a customer was injured on your property, general liability would help with your legal expenses and their medical bills. 
• Commercial auto: If you have vehicles used for business, commercial auto coverage is necessary. But, for your policy to cover damages related to wildfires, you need to have comprehensive insurance, which covers damages resulting from a fire. 
• Business interruption insurance: Business interruption insurance helps cover operating costs, employee payroll and lost income if a wildfire forces you to close your business. Coverage applies during the period needed to repair or replace the damaged property; there is typically a waiting period before coverage begins.
• Business owner's policy: A BOP is a package of common coverages, such as general liability, commercial property and business interruption insurance. 

What business insurance doesn't cover after a wildfire

Business insurance does not automatically cover lost income after a wildfire. Commercial property insurance covers building and equipment repairs but excludes income replacement during closures. Only policies that include business interruption coverage will reimburse lost revenue. According to a 2023 Hiscox study, 75% of small businesses are underinsured, meaning most policies may not fully cover wildfire losses.

If you don't have adequate coverage, you could be in for a costly surprise. 

For example, you may have commercial property insurance. While that covers the cost of repairs or replacement of your property due to damages from the wildfires, it doesn't include coverage for lost income. If your business has to close during repairs, you could be unable to pay your employees (or yourself). Only those with business interruption coverage will receive reimbursement for lost income. 

How to make a claim after a wildfire 

To file a wildfire insurance claim, contact your insurer as soon as it is safe to do so, document all damage with photos and videos, and collect business records, including profit and loss statements and tax returns.

1. Contact your insurer as soon as possible. As soon as you safely can, get in touch with your insurer. Depending on the company, you may be able to start the claims process online, although some companies require you to call their claims department. Provide your policy number, the location of the affected property and your phone number and email. The claims department will schedule an appointment for you with an adjuster. 

It can also be a good idea to meet with your agent to discuss your coverage. 

"BOP and package policies throw in a lot of extra coverages, like coverage for signs and landscaping," said Rick Dinger, president of Crescenta Valley Insurance, which is located just outside Los Angeles. 

2. Protect your property. When you contact the claims department, ask what steps you can and should take to protect your business. In some cases, you may need to make some repairs before the adjuster can get there; for example, you may need to replace broken or burned doors or board up broken windows until more permanent repairs can be made. 

3. Take photos and videos. If it's safe to visit the property, take photos of all of the damage. And, if possible, take a video walking through the damage. 

In general, you shouldn't remove any damaged property or debris until your adjuster has visited the property. But, if anything has to be removed because of safety concerns, take photos and videos first. 

4. Meet the adjuster. Once the fire department and authorities have deemed your area safe, the insurance company will schedule a time for the adjuster to visit your property and assess the damage. If possible, try to be there when the adjuster visits to discuss the damage. 

5. Collect documentation. Collect business records, such as your past profit and loss statements and receipts for damaged equipment. If you have business interruption coverage, make sure you also have past tax returns, monthly sales data or contracts to show your income. 

6. Keep good records. Good records are essential. Keep receipts for any items you purchase to repair your business property, such as tarps, wood boards or tools. Also keep track of any invoices or receipts for services, such as debris removal companies. 

7. Track the claim process. You can usually track your claim's status online through your insurer's customer portal, or you can contact your insurer for an update. Depending on the extent of your damages and your insurer, the claims process can take weeks or even months. 

Matthew Blumpkin, president of the National Association of Public Insurance Adjusters (NAPIA) and CEO of the Greenspan Co., advises against rushing to settle.

“Moving too quickly or without the necessary assessment phase can be problematic,” he says. “It is important to slow down. Properly evaluate the situation, understand what the policy will and will not cover, the documentation necessary to prove the loss and then ensure that the resolution from the insurance carrier is both fair and accurate.”

How can a small business get back to business while the claim is being processed?

Small businesses can relocate to temporary premises and rent a workspace while an insurance claim is being processed. Depending on the policy's coverage, the insurer may reimburse some or all of the extra expenses incurred during the relocation.

If the policy includes extra expense coverage, the insurer may reimburse costs for temporary premises rental, equipment rental, and other reasonable costs incurred to continue operating during the repair period. Keep all receipts and invoices for these expenses as part of the claim documentation.

How much is small business wildfire insurance?

The average cost of a business owner's policy (BOP), which includes wildfire coverage, ranges from $47.50 to $147.50 per month, according to the commercial insurance agency Insureon. The cost depends on the location, type of business, building construction and coverage limits.

What our expert says

Q: Should small business owners always push to get claims settled?

Matthew Blumpkin President of the National Association of Public Insurance Adjusters and CEO of the Greenspan Co.

"Moving too quickly or without the necessary assessment phase can be problematic. It is important to slow down. Properly evaluate the situation, understand what the policy will and will not cover, the documentation necessary to prove the loss and then ensure that the resolution from the insurance carrier is both fair and accurate."