Can Your Business Survive a Natural Disaster?

Can your business survive a natural disaster? Many don't. More than 30 percent of businesses never reopen their doors after they've been closed down for a hurricane, tornado, flood, or other devastating calamity. A disaster recovery plan and adequate insurance are keys to getting back to business, say the Insurance Information Institute and the Institute for Business & Home Safety.

Review Your Insurance Plan

No matter how small or large a business, make sure you have sufficient coverage to pay for the indirect costs of the disaster – the disruption of your business – as well as the cost of repair or rebuilding.

Your Insurance Plan Should Consider:

•  Understand your policy deductibles and limits. Speak with your insurance agent or company representative to make sure you know what kind of coverage you have.

•  Have sufficient coverage to pay for the indirect cost of the disaster. Coverage should include the disruption to your business, as well as the cost of rebuilding.

•  Evaluate your property insurance policy. Insure any improvements you've made to the property. There may be limitations on what the policy will pay for certain items. If you need higher amounts, discuss this with us.

•  Consider flood or earthquake damage. Typical property insurance policies exclude for flood or earthquake damage. If you're located in a flood zone, you'll probably have to buy a separate policy from the National Flood Insurance Program (NFIP).

•  Protect yourself against business interruption. Business interruption insurance covers the profits a business would have earned, base don its own records, had the disaster not occurred. It also pays for the operating expenses that continue, such as payroll, even through business activities come to a temporary halt.

•  Include extra expense insurance. Extra expense insurance reimburses you for what you spend, over and above your normal operating expenses, to avoid having to shut down during the restoration period.

•  Leave no gaps in your insurance. Insurance policies should include property, business interruption and extra expense insurance. Even if your basic policy covers expenses and loss of net business income, it may not cover income interruptions due to damage that occurs away from your premises, such as to your key customer or supplier or to your utility company.