Could your business survive a major emergency? Businesses that recover quickly have planned in advance. They know what needs to be done as soon as a disaster strikes and, most important, they’ve purchased the right insurance to finance their recovery.
It’s important to develop and maintain an adequate recovery plan to protect yourself against legal liability for the losses that might result from a disaster. 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. These should include whom to contact for medical assistance, how to call the fire department and evacuate the building and any special precautions that should be taken before leaving the premises. Different types of disasters may call for different kinds of measures.
Consider the things you may need initially during the emergency. Do you need a back-up source of power? Do you have a back-up communications system? If you’re likely to have cash-flow problems, check into the availability of loans and extensions of credit. Keep on hand a first-aid kit, a supply of flashlights, batteries, candles and candleholders and matches. Are you likely to need food and water?
Write out each step of the plan and assign responsibilities to employees in clear and simple language. If you employ workers whose native language is not English, assign someone to make sure these workers understand what they’re required to do. Distribute copies of the plan to each employee. Practice the procedures set out in the emergency response plan with 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, and your employees and company officials. Keep copies at home and at a more remote location (in case the disaster is widespread).
Decide on a communications strategy to prevent loss of clients/customers. Whether you decide to wait out the reconstruction period or relocate to temporary premises, current clients and those who use your services or products regularly should know how to get in touch with you, and when and where you expect to reopen for business. Otherwise, many will assume that you’ll be out of action for a long time.
Review your insurance program
For a business, the costs of a disaster can extend beyond the physical damage to the premises, equipment, furniture and other business property. There’s the potential loss of income while the premises are unusable. In addition, if you can’t afford to close up shop during the repair period, there’s the extra expense of keeping the business going from a temporary location. Your disaster recovery strategy should include a detailed review of your insurance policies to ensure there are no gaps in coverage.
Property Insurance. Is your property—the building and its contents—insured for current replacement prices? Don’t forget to insure any improvements you’ve made to the property, such as new storage cabinets and carpets. There may be limitations on what the policy will pay for certain items. If you need higher amounts, discuss this with your agent.
Typical property insurance policies exclude coverage for flood damage. If you’re located in a flood zone (check with your local municipality or bank about this), you’ll probably have to buy a separate policy from the National Flood Insurance Program.
Business Interruption Insurance. After every disaster, some businesses are forced to close their doors because they didn’t plan for the costs of a disruption to their operations. Business interruption insurance compensates for income lost when you have to vacate the premises due to disaster-related damage (you must be covered for the physical damage that caused the disruption). It covers the profits a business would have earned, based on its own financial records, had the disaster not occurred. It also pays for the operating expenses that continue, such as payroll, even though business activities have come to a temporary halt. Make sure the policy limits are sufficient to cover your company for more than just a few days. After a major disaster, it can take much longer than many people anticipate to get a business back on track.
Extra Expense Insurance. For some businesses, the cost of relocating can be greater than the revenue loss. 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.
Review on a regular basis all the components of your disaster recovery strategy—fire safety and emergency preparedness measures, business continuation and building repair plans, and your insurance program. Communicate changes to key employees. If you need help in identifying hazards and assessing risk or more information on how to develop a disaster recovery plan, call your insurance company and ask for loss control services.
This article is an excerpt from the brochure, “Insuring Your Business Against a Catastrophe,” published by the Insurance Information Network of California (IINC). IINC is a nonprofit, non-lobbying communications association representing the property/casualty insurance industry. For more information, visit www.iinc.org.
Reprinted from EzineArticles.com
