Adequate insurance is a must

Many business owners cut back on insurance during the recession to save money. The earthquake and hurricane on the East Coast are wake-up calls to have adequate insurance.

So, if your company is doing better, think about increasing your coverage. If you've purchased equipment or upgraded your property, you'll want to protect those investments.

What insurance you need depends on where you live and how much you're willing to bet that your business will not be damaged or destroyed by a natural disaster.

The earthquake caught millions by surprise, because quakes are a rarity in the eastern half of the country. Owners who thought their standard business owner policy would cover the damage were disappointed. These policies cover damage from tornadoes, rain, wind and hail, but not earthquakes. If you want quake insurance, you'll need to ask your broker about purchasing a separate policy.

In California, the Earthquake Authority runs a Web site about quake insurance, www. earthquakeauthority.com. It also helps residents and businesses find insurance. Other states don't have similar services.

Earthquake insurance can be expensive. In California, deductibles are

10 percent or 15 percent of the replacement value of a structure, according to the Insurance Information Institute. But in some parts of the country, where quakes are less common, the deductible could be as low as 2 percent. Premiums also vary widely.

Insuring your business for a hurricane is easier — the rain and wind a storm brings are covered under the business owner policy. The problem is when the hurricane causes flooding.

Floods are a natural disaster that requires a separate policy. The federal government has a flood insurance program (learn more at www.floodsmart.gov). You can purchase it through a property and casualty insurer, but it's the government that pays if you have a flood.

What's the difference between coverage for rain and coverage for flood? If water enters your building from rain soaking the roof, or the wind breaking a window or tearing a hole in the roof, your business owner policy will cover you. But if a flood at ground level sends water into the building, you need flood insurance to be reimbursed.

If you run a business out of your home, be aware that your homeowner insurance might not cover you if you suffer a business loss. For example, if your home office is flooded and your server is ruined. Check with your broker to see if you need a separate policy.

You should check with your broker to be sure that damage to your vehicles is covered by your business-auto insurance. Collision insurance won't do it — you need comprehensive insurance.

If your business is knocked out of operation by a natural disaster, you could be in trouble if you don't have business-interruption insurance. This insurance, which often is part of a business owner policy, will pay your operating expenses such as payroll and lease payments for your equipment. It also covers lost profits.

Many business owner policies include business-interruption insurance. It's a good idea to be sure that you have this coverage — and that you have adequate insurance if your business is sidelined for an extended period.

Business-interruption insurance also will cover you if the natural disaster strikes one of your vendors. U.S. manufacturers with business-interruption insurance were able to collect when their suppliers in Japan could not operate after the March 11 earthquake and tsunami.