No matter where your business is located, it’s likely that the threat of natural disaster is very real. Although these types of events don’t happen often, the devastation they leave behind can have significant consequences for your company. There may be no way to actually stop that damage from occurring when a natural disaster strikes, but there are things you can do to ensure that your business gets back up and running quickly afterwards.
PROPER INSURANCE COVERAGE
In order to enable yourself to recover from a natural disaster quickly, you need to have the proper type and level of insurance in place. While your Business Owner’s Policy may cover certain types of damage, most damage from natural disasters is not covered. The main exception to this is tornados, which are usually included in a standard BOP.
In California, the most significant threats in terms of natural disasters are earthquakes and volcanic eruptions. These will not be covered under your BOP or any standard business interruption insurance policy, but earthquake coverage can be added onto your policy as an endorsement through the California Earthquake Authority.
Similarly, coverage for damage caused by volcanic eruption can be added as an endorsement, and while these extra coverages will necessarily increase your premiums, the benefit of having the coverage in place when a disaster hits is well worth the added expense over the long term. Damage from flooding is also not covered under traditional business insurance policies, and the only way to acquire coverage for this is through the Federal Flood Insurance Program administered by FEMA.
APPROPRIATE COVERAGE LEVELS
The amount of coverage you have is another issue that you’ll need to be aware of as you assess your policy. While higher limits generally translate to higher premiums, it’s not worth it to pay for coverage that will ultimately be inadequate in the aftermath of a natural disaster. A thorough and accurate assessment of risk and the cost of repairs that will be needed is the only way to ensure the policy you’re paying for will provide what you need when you need it.
Similarly, you want to make sure you’re paying for coverages you’re likely to need and not those you won’t. This means things like not paying for hurricane insurance in Oklahoma or earthquake insurance in New Jersey. You want to make sure you’re thoroughly protected, but you don’t want to be throwing money away either.
PLANNING AHEAD
Having the proper coverage in place is essential when you’re working to get your business up and running after a natural disaster, but it’s not all you need. You’ll also want to have a solid plan in place that outlines what steps to take to assess the damage and begin repairs. Under this plan, you and your management team should each have clearly defined responsibilities, and there should be a process outlined for how to alert employees to the status of the business as well.
CONTINGENT BUSINESS INTERRUPTION INSURANCE
One often overlooked element in the process of recovering from a natural disaster is the state of your suppliers. While your business may have emerged relatively unscathed, the same may not be true of others that provide your raw materials or other supplies, and that will have real consequences for your ability to reopen quickly.
To protect yourself from lost revenue in this type of situation, you need to find out if your suppliers are covered by their own business interruption insurance and how that will apply in their relationship to you. If they’re not, you can add contingent business interruption insurance to your policy, which will cover you for profits lost due to a disruption in your supply chain.
Whether you’re just starting out or have been in business for a while, having the right plan and insurance coverage in place in the event of a natural disaster can make all the difference in your company’s ability to resume normal operations quickly. If you’d like to learn more about how we can help you get the coverage you need, contact our offices today.
