Small businesses understand insurance limits after fires and floods
Los Angeles fires are still raging, with a total of 12,300 structures destroyed, including dozens of restaurants, shops and community landmarks. Many homeowners have already filed insurance claims — joining a growing number of entrepreneurs across the country who are learning how much coverage they have after weather-related disasters.
“We're in limbo until the claims people can go out and see what's not there anymore,” said Paul Rosenbluh, co-owner and operator of Fox's Restaurant. was an Altadena restaurant that was destroyed in the Eaton Fire.
There are going to be a lot of businesses that think they have more (coverage) than they have.
Douglas Heller, Insurance Director, Consumer Federation of America
Days after the fire, Rosenbrough told NBC News he wasn't confident he could rebuild in the area. But once property damage is accounted for, he expects the insurance company's response to be a simple, “Here you go, thank you and good luck,” he said Thursday. His coverage includes property insurance and general liability insurance, which typically cover financial losses from a variety of causes.
Experts warn that many small business owners may be facing a harsher reality.
“What I can say with confidence: There are going to be a lot of businesses that think they have more (insurance coverage) than they actually have,” said Douglas Heller, insurance director for the Consumer Federation of America, an advocacy group.
Heller said the insurance crisis unfolding across California is mirrored in many places across the country. Business owners are increasingly faced with a patchwork of expensive insurance and overburdened government programs that struggle to fill some gaps, ultimately leaving many policyholders with the liability.
“The risk is increasing, but no one wants it,” he said.
Rosenbrough and other wildfire victims may have reason to be optimistic, since fire damage is often covered by many business owners’ insurance policies. But entrepreneurs who have recently experienced disasters of a different kind have not been so lucky.
After Hurricane Helen tore through western North Carolina in October, Erin Smith, owner of Humanité Boutique in Bryson City, said her women's clothing store was filled with 2 inches of water and was forced to close for eight days. Her small business policy included general liability coverage, but she said she was shocked when her carrier told her it didn't cover business interruption. To do that, she needed flood insurance — something she didn't realize when she signed up.
“This is my first time with flooding,” Smith said. “No one buys flood insurance.”
An annual survey of businesses, insurance brokers and risk advisors released this month by Allianz Financial showed climate change jumped to fifth place among the issues of most concern in 2025, up from seventh place last year. Survey's 14-year history of highest rankings. There were 27 natural disasters that caused at least $1 billion in damage nationwide in 2024, according to the National Oceanic and Atmospheric Administration, second only to the 28 recorded in 2023.
This is my first time encountering a flood. No one buys flood insurance.
Erin Smith, owner of Humanité Boutique, Bryson City, NC
At the same time, many small business owners are paying more for policies they don’t fully understand. JD Power found that 36% of entrepreneurs saw premium increases last year, up from 34% in 2023, with more than half of those increases initiated by insurance companies. A 2023 survey by insurance company Hiscox revealed that nearly three-quarters of small businesses said they didn’t know what their business owners’ policies typically cover, and 83% were unable to accurately describe general liability coverage.
“A lot of businesses, like a lot of homeowners, are surprised after a disaster,” Heller said. “Four years ago, there might have been an agent who said to them, 'Oh, you know, if you get out of this, you're Save some money.'”
Smith is the first to admit that business insurance fine print is “not my area of expertise.” Still, she wishes her carrier could better communicate her options and plan details.
Although Smith's boutique is back up and running, she learned this month that the floors may need to be completely replaced — which could cost $30,000, she said, on top of thousands of dollars in surface water damage.
As she searched for other lifelines, FEMA directed her to apply for an Economic Injury Disaster Loan (EIDL), which provides qualifying businesses with up to $2 million in working capital after a disaster event, plus one year of Deferred payment. But Smith said she is still paying off early EIDL debt accumulated during the pandemic.
“I can't. It's not working for me,” she said. “Pray that everything will be okay.” “
Isaac Herrin, also in Bryson City, faced a similar dilemma when Helene destroyed more than $20,000 worth of inventory at his retail store, Selah Collection. Herring, who rents the space, said he is paying for commercial property insurance, which is coverage to repair or replace an asset. But he said his claim was denied because the store's landlord didn't have flood insurance.
“I went back and tried to argue with the airline,” he said. “This wasn’t just a flood – we had a hurricane in the mountains!”
Before Helen ravaged the region, insurance companies considered the risk in western North Carolina relatively low. A subsequent Reuters analysis of federal data found that only one in 200 single-family homes in the Inland region, despite its proximity to the Takajie River, which has become increasingly prone to flooding as heavy rains occur more frequently, found Covered by the National Flood Insurance Program.
Janet Ruiz, a spokeswoman for the Insurance Information Institute, an industry group, said at least a quarter of flood claims come from non-flood-designated areas. Extreme winter weather can also increase that number – frozen ground doesn't absorb water, increasing the likelihood of flash flooding.
“The hurricane area is only a small portion of the flooding,” she said.
Heller said small business owners need a comprehensive federal alternative to the current piecemeal options. NFIP, which has come under scrutiny recently, covers commercial buildings and property for up to $500,000 per policy. Like California's FAIR program, it is stretched thin by increasingly erratic weather. It currently owes the U.S. government more than $20 billion and is approaching a $30 billion borrowing limit. Its coverage also does not include financial losses due to business interruption.
President-elect Donald Trump rejected the Republican policy blueprint Plan 2025 and suggested privatizing the NFIP, even as his transition team used the initiative for staffing purposes, leaving Trump supporters on Monday Get attention when you take office. A spokesman for the Trump transition team did not immediately respond to a request for comment.
Heller pointed to the INSURANCE Act introduced by then-Rep. Last year, California Democrat Adam Schiff proposed a model that would effectively insure insurance companies, incentivize them to take on more risk and prevent them from retreating from disaster-prone areas. Still, the bill has made little noise in Congress and is not expected to gain traction amid the impending shift in power in Washington.
“We need to make sure the government works for businesses and makes sure these products are real, good quality and affordable so that (insurers) can take on this risk,” Heller said. “While the regulators who are supposed to protect us are very protective of homeowners, There is limited regulation in the insurance market, but even more so for businesses.”