The proper insurance is a crucial element of disaster planning. Adequate insurance will greatly reduce the financial cost of recovery from a disaster. In the extreme case, lack of proper insurance can result in a financial collapse.
Probably the most obvious Business insurance covers the company against the death of a key executive. In a small company, the death of the key executive can often trigger a complete business failure. A larger business can take basic precautions, such as not allowing executives to travel together, but it still might experience a substantial financial loss. A business of any size can benefit from the purchase of Key Executive coverage payable to the business if a key executive dies.
Business insurance, beyond the protection of owned and leased property, is often overlooked in the disaster planning process. Consider purchasing Business Interruption insurance for protection against the loss of suppliers or buyers, coverage of payroll expenses, and a multitude of other contingencies.
Have a risk management professional help you identify and analyze your company's hazards. These three categories represent ways companies respond to risks:
1. Risk Avoidance: Take action to reduce or eliminate the risk.
2. Risk Transfer: Reduce financial damages by assigning the risk to an insurance company or other party.
3. Risk Acceptance: To the extent that it is not practical or possible to avoid or transfer a risk, the risk is accepted.
Because it is not practical or even possible to protect every aspect of the business, insurance is an important part of the Business Continuation Plan. In addition to insuring your executives, carefully review your Business insurance policy with an insurance professional and answer these vital questions:
1. Are my coverage limits and deductibles appropriate?
2. What times of disasters (perils) am I covered against, and what perils are specifically excluded?
3. Does my insurance provide adequate protection to senior management against litigation resulting from insufficient business continuity planning?
4. Does my coverage factor in inflation, improvements, and building code changes?
5. Is my coverage for 'replacement cost' or 'actual value' (cost less depreciation)?
6. Does my Business Interruption insurance cover payroll expenses and loss of income?
7. Is my documentation (serial numbers, dates of purchase, costs, receipts, photographs, etc.) current and sufficiently detailed for my insurance company?
8. Is the original of all insurance policies secured in a fireproof cabinet, with a copy readily available?
9. Am I covered for loss of power or other critical services?
10. Am I covered for the loss of critical suppliers or buyers?
11. Am I covered for a denial of access order issued by civil authorities?
12. Does my insurance cover losses caused by disrupted transportation services?
13. If a 'disaster declaration' is made by the Disaster Management Team, does my insurance cover the costs charged by my alternate-site vendor? Does it cover all the extra personnel and other costs associated with activating and operating the alternate site?
14. Have I reviewed my coverage with my professional insurance advisor within the past year?
15. If I implement an effective Business Continuation Plan, will my insurance premiums go down?