When a hurricane strikes, businesses face a variety of challenges, from structural damage to interruptions in daily operations. For retail businesses, a less obvious but critical risk is damage to Electronic Article Surveillance (EAS) systems, which help protect inventory from theft. These systems are an important part of loss prevention strategies, so what happens if a hurricane damages your EAS system? Is it covered under commercial property insurance, and what steps can you take to ensure your business recovers smoothly? Let’s dive into these questions.
What is an EAS System?
Before we get into the specifics of hurricane damage, it’s important to understand what an EAS system does. EAS security tag systems are designed to prevent shoplifting by alerting staff when merchandise leaves the store without proper deactivation. The system usually includes security tags placed on items and sensors at store exits to detect unpaid merchandise.
If a hurricane damages this system, not only is your store left vulnerable to theft, but the cost of replacing or repairing the system can be significant. That’s where commercial property insurance can play a role.
Does Commercial Property Insurance Cover EAS Systems?
In many cases, yes—commercial property insurance can cover the damage or replacement of an EAS system if the loss results from a covered peril. Hurricanes typically involve high winds, rain, and sometimes flooding, and the cause of damage will determine if it’s covered under your policy.
1. Wind and Rain Damage
Most commercial property insurance policies cover damages resulting from wind and rain, both of which are common during hurricanes. If a hurricane causes rain to enter your building or high winds knock over critical infrastructure, leading to the failure of your EAS system, this is likely covered.
2. Flood Damage
This is where things get tricky. Standard commercial property insurance does not cover flood damage. If your EAS system is damaged due to rising floodwaters or storm surges, you'll need a separate flood insurance policy to cover the costs. For businesses located in hurricane-prone areas, especially near coastal regions, flood insurance is an essential add-on to your standard policy.
What’s the Difference Between Replacement Value and Actual Cash Value?
When dealing with equipment like an EAS system, it's important to understand how your commercial property insurance policy will reimburse you for the damage. There are two main types of coverage:
- Replacement Value: This coverage pays the full cost to replace the damaged EAS system with a new one at current market prices. It does not account for depreciation, so if your system is outdated, you'll still get enough to purchase a brand-new replacement
- Actual Cash Value: This coverage takes depreciation into account. If your EAS system is several years old, the insurance company will only pay the depreciated value, which may be far less than the cost of a new system.
When assessing your insurance needs, opting for replacement value coverage may be more expensive, but it ensures you're not left short if your equipment needs to be replaced.
Don’t Forget Business Interruption Insurance
In the aftermath of a hurricane, your EAS system might not be the only thing affected. If the damage leaves your store vulnerable to theft, you may decide to temporarily close or limit operations until repairs are made. During this period, your business may experience a loss of revenue. That’s where business interruption insurance comes in.
Business interruption insurance covers lost income during the time it takes to repair or replace your damaged EAS system and other equipment. It can also help cover the costs of relocating your business or setting up temporary operations while repairs are underway.
Reducing Your Risk
While you can’t prevent a hurricane from striking, you can take steps to mitigate the damage to your EAS system and other business assets:
- Install Storm Shutters: Protect windows and doors from wind and flying debris to minimize rain damage inside your store.
- Elevate Equipment: If you’re in a flood-prone area, consider elevating sensitive equipment, including your EAS system, to reduce the risk of water damage. In the case of EAS systems this ca be accomplished with metal risers.
- Back Up Critical Data: Ensure your point-of-sale data is regularly backed up to the cloud so you don’t lose vital information during a storm.
- Routine Maintenance: Keeping your building’s roof, gutters, and plumbing in good condition can help prevent water damage during a hurricane.
Work With Your Insurance Provider
Navigating the complexities of commercial property insurance can be challenging, especially when it comes to protecting specialized equipment like an EAS system. The best way to ensure your business is fully covered is to work with an experienced insurance advisor. They can help you assess your risks, determine the appropriate coverage amounts, and advise on any additional policies—like flood insurance—that may be necessary for your business.
Conclusion
Hurricanes can cause significant disruption to your business, but having the right commercial property insurance coverage can make all the difference. If your EAS security tag system is damaged by wind or rain, your insurance policy will likely cover the repair or replacement costs. However, flood damage will require a separate policy, and understanding the difference between replacement value and actual cash value is critical when making sure you’re adequately protected.
By taking proactive steps to reduce your risk and partnering with an insurance advisor, you can protect your business and its assets from the worst-case scenario—ensuring you’re back in business as quickly as possible after the storm passes.
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For more information about commercial property insurance and hurricane protection, contact your insurance advisor today!