Do You Have Enough Insurance to Cover Rebuilding Costs After a Disaster?

When it comes to insurance, small businesses stand to lose the most by not having adequate coverage.  And while the mega-disasters like last year’s Hurricane Irene get a lot of media attention, those cataclysmic events are rare.   Smaller disasters, like the neighborhood power outage or the burst pipes that leads to a business shutting down for just a couple of days, hour, can force an under-insured business to close down for good.

Ten months after Hurricane Irene ravaged communities along the East Coast and Puerto Rico, the U.S. Small Business Administration continues to approve disaster loans to homeowners, renters and businesses.  So far SBA has approved more than $132 million in disaster loans to more than 1,400 businesses, to cover underinsured losses.   After all the work you’ve done to build a profitable business, it’s essential to protect your investment with enough insurance to weather the disaster and quickly resume operations.     

Here are a few action items to consider when filling out the insurance portion of your business continuity plan:

• Review Your Insurance Coverage. Contact your insurance agent to find out if your policy is adequate for your needs.  The policy should be tailored to the individual business and take into consideration not only property damage but loss of revenue and extra expense that occur when a disaster causes a temporary shut-down.
• Ask a lot of questions.  Make sure you understand the policy limits, the deductible, and what is actually covered
• Consider Business Owner’s Insurance.  The Business Owner’s Policy (BOP) is a standard insurance package of coverage that a typical small or medium-sized business would need.   It includes general liability protection, and business interruption insurance, which provides money to offset lost profits or pay operating expenses the business could have covered if the disaster had not occurred. 
• What about Flood Insurance? According to the U.S. Geological Survey, floods are the leading cause of natural disaster property losses.  Business owners, particularly those running home-based businesses, should consider getting coverage from the National Flood Insurance Program. Most homeowners’ insurance policies don’t cover flood losses.
• Know what you own.  Inventory your personal and business assets before the disaster occurs.  Record the price and estimated replacement cost of furniture, computers, machinery—everything of value at your business.  Keep receipts, take photos and video of your property, and store that information office at a secure location.

Having a plan in place to restore your business to its pre-disaster condition requires a bit of focus and foresight, and the cash to maintain the right insurance policies.  In the long term, it will make a difference when it comes time to deal with the aftermath any kind of disaster, whether it’s a massive hurricane, or the water-main break in the alley behind your business. 

Related Resources

• Insurance is Financial Risk Mitigation—Ready.Gov
• Protect Your Small Business with Flood Insurance from FloodSmart.gov
• Business Insurance—Insurance Information Institute