Consumer Preparation / Business

Posted on July 17, 2007 

Can Your Business Survive a Natural Disaster?
Advance Planning, Proper Insurance are Essential

Contact: Insurance Information Institute
New York: 212-346-5500; This email address is being protected from spambots. You need JavaScript enabled to view it.
Wash. D.C.: 202-833-1580

NEW YORK  – Can your business survive a natural disaster? More than 30 percent of businesses never reopen their doors after they’ve been closed following a hurricane, tornado, flood or other devastating calamity.
A disaster recovery plan and adequate insurance are keys to getting back to business, according to the Insurance 
Information Institute (I.I.I.) and the Institute for Business & Home Safe Safety.

Review your insurance plan

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

Your insurance plan should consider the following:

�� Understand your policy deductibles and limits. Speak with your insurance
company representative to make sure you know what kind of coverage you have.
�� Have sufficient coverage to pay for the indirect costs of the disaster. This necessary protection includes 
include the disruption to your business – as well as the cost of repair or replacement of the building and contents.
�� Evaluate your property insurance policy. Insure any improvements you have made to your
property. There may be limitations on what the policy will pay for certain items. If higher amounts of coverage may be necessary, discuss this with your agent.
�� Consider flood or earthquake damage. Typical property insurance policies exclude coverage for flood or earthquake damage. If you’re located in a flood zone, you should have flood insurance and may be required to have it. Contact your local municipality or bank about this. 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, based on its own financial record, if the disaster not occurred. It also pays for the operating expenses that continue even though business activities have come to a temporary halt.
�� Include extra expense insurance. Extra expense insurance reimburses you for costs you incur over and above your normal operating expenses, to avoid having to suspend operations during the restoration period.
�� Leave no gaps in your insurance. Even if your policy covers expenses and loss of net business income, it may not cover income lost to damage that occurs away from your premises, such as to your key supplier or to your utility company.

Develop a Disaster Recovery Plan

A business impact analysis should be developed to identify what an operation may need to fully protect itself in the face of a natural disaster. Large corporations often hire risk manager for this task and some companies hire consultants with expertise in disaster planning to assist them. But small businesses can do the analysis and planning on their own.

Your business plan should consider the following:

�� Set up an emergency response plan and train employees how to carry it out. Make sure employees know whom to notify about the disaster and what measures to take to preserve life and limit property losses.
�� Write out each step of the plan and assign responsibilities to employees in simple language. Practice the procedures set out in the emergency respose plan, including regular scheduled drills.
�� Compile a list of important phone numbers and addresses. Make sure you can get in touch with key people after the disaster. The list should include local and state emergency management agencies, major clients, contractors, suppliers, realtors, financial institutions, insurance agents and insurance company claim representatives.
�� Decide on a communications strategy to prevent loss of customers. Options include communications outside your  your premises; contacting clients by phone, e-mail or regular mail; and placing ads in local newspapers.
�� Consider the things you may need initially during the emergency. Do you have a backup source of power? Do you have a back-up communications system?
�� Human resources. Protect employees and customers from injury on the premises. Consider the possible impact a disaster will have on your employees’ ability to work and how customers can return to your shop or receive goods or servvices.
�� Physical resources. Inspect your business’ physical plant(s) and assess the impact a disaster would have on facilities. Make sure your plans conform to local building code requirements.
�� Business community. Even if your business escapes a disaster, there is the possibility you could suffer significant losses due to the inability of suppliers to provide goods and services or a reduction in customers. Businesses should communicate with alternative markets, (especially if they are selling to a business as a supplier) about
preparedness and recovery plans, so that everyone is prepared.
�� Protect your building. If you own the structure that houses your business, include disaster protection for the building as well as the contents into your plan. Consider the financial impact if your business shuts down as a result of a disaster. What would be the impact for a mpact for a day, a week or an entire revenue period?
�� Keep duplicate records. Back-up computerized data files regularly and secure the duplicates off premises. Keep copies of important records and documents in a safe deposit box and make sure they’re up-to-date.
�� Identify critical business activities and the resources needed to supplement them. If you cannot afford to shut down your operations, even temporarily, determine how you would run the business at another location.
�� Find alternative facilities, equipment and supplies, and locate qualified contractors and suppliers.
Consider a reciprocity agreement with another business. Try to get an advance agreement from at least one contractor to respond to your needs.
�� Protect computer systems and data. Data storage firms offer offsite backup data that can be updated regularly via high-speed modem or through the Internet.

Most business owners are complacent about natural disasters until it happens to It’s only when the owner has gone through a disaster that a disaster plan, including  proper insurance, is usually considered.

Business owners who need additional information regarding disaster preparedness can contact the I.I.I. Web site at: You can download a copy of Open for Business: A Disaster Planning Toolkit for the Small Business Owner at: or the Small Business Administration at:


July 17, 2007

This is an excellent Internet site with general information about insurance for businesses. It was developed by the Insurance Information Institute in New York.

Business Insurance Information

Citizens Property Insurance Corporation and private insurers will not issue new coverage when a hurricane is threatening Florida, as fire coverage would not be available on a home already on fire.

When Insurers Stop Writing in Face of a Hurricane