Insurance Lessons Learned From Sandy: Steps to Keep Your Business Running Following a Disaster
Three Steps for Keeping Your Business Running
1. Develop a Business Contingency Plan
- Keep up-to-date, computerized and written records.
- Identify critical business activities and resources needed to maintain customer service while your business is closed for repairs.
- Do research before a disaster strikes by finding alternative facilities, equipment and supplies, and locating qualified contractors that can repair your facility, if needed.
- Consider the resources you may need to activate during an emergency such as back-up sources of power, computers and communications systems.
- Compile important contact information including employees, local and state emergency management agencies, major clients, contractors, suppliers, realtors, financial institutions, insurance brokers and claims representatives.
2. Have a Disaster Response Plan in Place
- Set up an emergency response plan and train employees how to execute it. Make sure you include someone from each area of the business.
- Appoint a leader to be in charge of developing, managing and updating your disaster recovery plan. This includes how you will communicate with employees, families, outside safety and emergency organizations, customers, neighboring businesses and, if necessary, the media.
3. Review Your Insurance
There are several forms of business insurance coverage to consider and discuss with your insurance professional:
- Building Coverage provides coverage up to the insured value of the building if it is destroyed or damaged by a covered cause of loss, such as a hurricane.
- Business Personal Property provides coverage for contents such as furniture, fixtures, equipment and machinery, computers, printers, inventory and supplies. It also includes coverage for personal property that is kept at the business site.
- Business Interruption coverage typically comes into play if there is physical damage to the structure as the result of a risk or peril specified by the policy language. Remember: Most commercial property policies exclude flood coverage.
There are four types of coverage that are typically associated with business interruption coverage. Determine which coverages are right for you:
i. Business Income provides coverage for lost revenue and normal operating expenses if the place of business becomes uninhabitable after a loss during the time repairs are being made. The amount of business income payment is determined by your company’s net profit or loss before taxes and continuing normal operating expenses, including payroll. Make sure the policy limits are sufficient to cover your company for more than a few days. After a major disaster it can take more time than anticipated to get a business back on track. And be aware that there is generally a 24- to 48-hour waiting period before business income coverage kicks in.ii. Extra Expense insurance provides coverage for the extra costs incurred above and beyond your normal monthly expenses—such as temporary relocation or leasing of business equipment—while repairs are being completed at your place of business. Extra Expense insurance can be combined with business income as part of the policy.iii. Contingent Business Interruption/Supply Chain Coverage compensates you for any income you lose due to property loss or damage at a supplier’s or customer’s location. The cause of the interruption must be from a covered peril and must result in physical damage that inhibits the third party from being able to supply or receive the insured’s goods. Supply chain insurance also offers business owners protection against both physical and non-physical interruptions to their business, such as strikes, riots, ingress/egress, pandemics and more. Any peril that interrupts a company’s supply chain can be underwritten into the policy. It is important to make sure your company’s records and books are up-to-date and accurate in order to be able demonstrate how a key component, product, supplier or re-seller contributes to company earnings.iv. Civil authority coverage pays for loss of income or extra expenses as a result of a government denying you access to your business due to a covered loss at a location owned by someone else.
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