Dozens of restaurants, shops and community landmarks are among the 12,300 works destroyed in fires it’s still raging in Los Angeles. Many of their owners are already filing insurance claims, joining a growing number of business owners across the country who are discovering how far their coverage extends after weather-related disasters.
“We’re kind of in limbo until the insurance adjusters can go and look at what’s no longer there,” said Paul Rosenbluh, co-owner and operator of Fox’s Restaurant, an Altadena restaurant that was consumed in Eaton’s fire.
Many companies will think they had more (coverage) than they do.
Douglas Heller, Director of Insurance, Consumer Federation of America
Rosenbluh told NBC News days after the fire that it is not certain that we will be able to rebuild the region. But once the property losses are counted, he hopes that the response from his insurer will be as simple as: “There, thank you, good luck for the future,” he said Thursday. Its coverage includes property insurance as well as general liability insurancewhich generally covers financial losses from various causes.
Many small business owners could face a harsher reality, experts warn.
“I can say with confidence: Many companies will think they had more coverage than they do,” said Douglas Heller, insurance director for the Consumer Federation of America, an advocacy group.
THE insurance crisis What’s unfolding across California is mirrored in many places across the country, Heller said. Business owners are increasingly faced with a patchwork of costly coverage and bloated government programs that struggle to fill some gaps, leaving many policyholders paying the cost in the end.
“The risk is increasing and no one wants that,” he said.
Rosenbluh and other wildfire victims may have reason to be optimistic because fire damage is usually covered by insurance. policies of many business owners. But entrepreneurs who have recently faced different types of disasters have not been so lucky.
After Hurricane Helene tore through western North Carolina In October, Erin Smith, owner of Humanité Boutique in Bryson City, said she was forced to close her doors for eight days after 2 inches of water filled her women’s clothing store. Her small business insurance policy included general liability insurance, but she said she was shocked when her insurer informed her that this insurance did not include business interruption. For that, she would have needed flood insurance – something she didn’t realize when she signed up.
“It was my first flood,” Smith said. “No one had flood insurance.”
In a annual Allianz survey Among businesses, insurance brokers and risk consultants that the financial firm released this month, climate change rose from 7th last year to 5th among the top concerns for 2025 – its ranking the highest in the 14-year history of the survey. There were 27 natural disasters that cost at least $1 billion nationwide in 2024, according to the National Oceanic and Atmospheric Administrationjust behind the 28 recorded in 2023.
It was my first flood. No one had flood insurance.
Erin Smith, owner of Humanité Boutique, Bryson City, North Carolina
Meanwhile, many small business owners are paying more for policies they don’t fully understand. Bonuses increased for 36% of entrepreneurs last year, JD Power found – more than the 34% who saw increases in 2023 – and more than half of these increases were initiated by carriers. Nearly three-quarters of small businesses questioned by insurer Hiscox in 2023, they reported not knowing what a business owner’s insurance policy typically covered, while 83% could not accurately describe general liability coverage.
“Many businesses, just like many homeowners, are surprised after the disaster,” Heller said. “There’s maybe a broker who, four years ago, said to them, ‘Oh, you know, you can save a little money if you get rid of this.’ »
Smith is the first to admit that the fine print of commercial insurance “is not within my expertise.” She would nevertheless like her operator to better communicate her options and the details of her plan.
Although Smith’s shop is back up and running, she learned this month that the flooring may need to be completely replaced, which could cost $30,000 on top of thousands of dollars incurred from superficial water damage , she said.
During his search for other lifelines, the Federal Emergency Management Agency asked him to apply for a Economic Injury Disaster Loanor “EIDL,” which provides eligible businesses with up to $2 million in working capital after catastrophic events, plus one year of deferred payments. But Smith said she is still paying off the EIDL debt she accumulated during the pandemic.
“I can’t. It just doesn’t work for me,” she said. “Fingers crossed that everything works out.”
Isaac Herrin, also in Bryson City, faced a similar dilemma when Helene destroyed more than $20,000 worth of inventory at her retail store, Selah Collection. Herrin, who rents the space, said he pays for business contents insurance, a type of coverage that repairs or replaces assets. But he said his application was denied because the store owner didn’t have flood insurance.
“I went back and tried to talk” with the carrier, he said. “This is more than just a flood: we were hit by a hurricane in the mountains! »
Before Helen ravaged the area, insurers considered western North Carolina relatively low risk. Subsequently, a Reuters analysis of federal data found that only 1 in 200 single-family homes in the interior area were covered by the National Flood Insurance Program despite its proximity to the Tuckasegee River, which is becoming increasingly prone to flooding as rainstorms become more frequent.
At least a quarter of flood-related claims come from areas not designated for flooding, said Janet Ruiz, a spokeswoman for the Insurance Information Institute, an industry group. Extreme winter conditions also increase this figure… frozen ground does not absorb waterthus increasing the risk of flash floods.
“Cyclonic zones only account for a small part of the flooding,” she said.
Heller said small business owners need a comprehensive federal alternative to the piecemeal options currently available. The NFIP, which covers buildings and commercial properties up to $500,000 for each policy type, has recently come under scrutiny. As California’s FAIR Programit was put to the test by increasingly unstable weather conditions. It currently owes more than $20 billion to the U.S. government and is up against its $30 billion borrowing limit. Its coverage also does not include financial losses resulting from business interruption.
Project 2025, the Republican political project that President-elect Donald Trump has disavowed despite his transition team leverage the initiative for staffing purposes, recommends privatization the NFIP, putting defenders under surveillance as Trump takes office Monday. A spokesperson for Trump’s transition team did not immediately respond to a request for comment.
Heller pointed to the Insure Act, a bill introduced by then-Rep. Adam Schiff, Democrat of California, last year as a model that would effectively insure insurers, encouraging them to take on more risk and preventing them from withdraw disaster-prone areas. The bill, however, has seen little progress in Congress and is unlikely to gain traction in the context of the upcoming change of power in Washington.
“We need to make sure the government is working for businesses in making sure these products are real, quality and reasonably priced so (insurers) can take on that risk,” Heller said. “As limited as oversight of the home insurance market is by the regulators who are supposed to protect us, it is even less for the companies.”