Are You Covered?

Natural disasters have a way of changing business priorities. Before one, insurance may be the last thing on your mind. Afterwards, it's bound to be near the top of your list of to-dos — or should-have-dones. Those who have been hit by nature's fury soon learn if their coverage was adequate. Those who have escaped get a warning, and a chance to close coverage gaps in case they are not so lucky next time.

Hurricane Katrina, which at this writing seems destined to go down in history as America's costliest natural disaster, devastated the Mississippi and Louisiana Gulf Coast and literally washed away much of the region's home medical equipment business. Many providers will bounce back, either because their facilities and inventory survived the storm, because they were adequately insured, or both.

Some may not have been so lucky or well prepared. And experts in insurance for HME firms say many other providers may be in danger of a similar knockout blow in the future. It doesn't have to be a hurricane. Any other disaster that covers a wide area, such as tornado outbreaks, floods, earthquakes or wildfires, can ruin a poorly insured business in the wrong place at the wrong time.

So how much insurance, and of what kind, is enough? The answer depends greatly on the particulars of each business — its size, location, product line and range of services. But certain rules apply across the board.

First, the HME business has special coverage needs that conventional business policies may not meet. Second, don't expect one policy to not cover all potential disasters.

Policies that insure against losses from fire and wind, for instance, normally do not cover flood damage. Finally, fit your insurance portfolio to your real risks. Don't skimp on coverage you need in order to buy coverage you don't.

Off-Premise Perils

To understand what is distinctive about the insurance needs of HME, consider the “H” — for home. At any given time, a typical HME firm will have much of its property off-site, either being used in patients' homes or being transported there. “In our business you have a lot of your equipment out all the time,” says Mike Hamilton, executive director of the Georgia and Alabama HME associations. “If you don't, you're going broke because it's not being rented out.”

But typical commercial insurance policies have fixed limits for property off the premises of the business. And it's not a sure thing that the customers' insurance will cover loss or damage to rented equipment such as oxygen concentrators, beds and the like.