If a fire, water main break or other disaster shut down your business, how would you recover? Would you be able to pay your rent and other obligations? What would happen to your employees?
Don’t let disasters derail your business. The best ways to disaster-proof your business are with adequate insurance and proactive planning and fortunately, there are many resources available to help you get your business back on track after an unexpected closure or other unfortunate event.
According to the Institute of Business Home and Safety, 25% of businesses never reopen following a disaster or interruption.
Having an emergency plan and adequate insurance coverage can mean the difference between reopening or shuttering your doors for good. For example, did you know that you can be compensated for expenses and loss of income if your business is closed for extended periods due to a disaster?
Here are four factors to consider in disaster planning and recovery for your business:
1. Annually Review Your Business Insurance Coverage
Review your insurance coverage every year to ensure it still meets your needs. You should also:
- Know what is covered and how much before a disaster strikes
- Maintain an inventory and equipment list
- Have complete copies of your business or commercial policy on-hand
Tip: Insure your property at replacement value
According to Farmers Insurance agent Ben Frihauf, you should have building and business personal property insured for replacement value to avoid a claim being paid on an actual cash value (depreciated value). This information is usually found in the settlement clause of your policy. For example: 25-year-old tables and chairs may be determined to be at the end of their lifespan at the time of loss so that no reimbursement will be made. If properly insured, the tables and chairs will be reimbursed at the full cost to purchase new items.
Frihauf cautions that underinsuring property may save money until there is a loss. At the time of settlement, if the property is underinsured, the claim will incur a co-insurance penalty and you may not get a full payout. Make sure you understand your policy’s co-insurance clauses and requirements so you are not underinsured.
A note about flood insurance…
Unfortunately, flood damage caused by natural disasters is not covered by general liability or property insurance policies. Through the National Flood Insurance Program (NFIP), all businesses are eligible for flood insurance to a maximum of $500,000 for the building property and usually up to $500,000 for business property. Visit FloodSmart.gov to learn more about flood insurance. Also, there are private insurance carriers who offer flood coverage. Contact your agent to learn more about those options.