Of events with negative financial and commercial impacts, natural disasters such as floods, hurricanes, tornadoes and earthquakes are at the top of the list. In 1907 a massive earthquake in San Francisco touched off a financial panic and Hurricane Katrina caused widespread destruction and business interruption.
Natural disasters can wreak havoc on all industries, not just oil and fishing. Small and large businesses are equally concerned about the effect a disaster will have on their balance sheets.
The inability to recover quickly from a disaster can mean permanent losses for some businesses. This is why having a disaster recovery plan is important: the right plan helps business owners get operations back on track without catastrophic losses.
Needs assessment. To formulate a disaster recovery plan, a business should first assess its needs. One of our qualified insurance agents can review financial records with the business owner and identify what requires coverage, such as loss of income, continuing operating expenses, or miscellaneous expenses after a disaster.
Document organization. Organization is one of the most critical components to surviving a disaster intact. The right documents, gathered together and secured properly, will save hundreds of hours later. Depending on the nature of the business, off-site backup of critical files may be appropriate.
Commonly, insurance companies will insure foundational elements of a business, such as business income. Business interruption insurance may replace lost income when a business is closed because of a covered disaster. Accurate, detailed records of income and expenses are necessary for an adjuster to estimate what profits would have been had the business not closed.
Documents to back up
- Insurance policy contracts
- Information on bank accounts associated with the business
- Leases
- Income tax return forms for the past three years
- Sales records
- Inventory lists
It is also wise to keep a list of the important people the business would need to contact after a disaster, including bankers, landlords, accountants, creditors, employees, and customers.
For other business recovery concerns, see Bed Bug Infestation Recovery Insurance for examples of specialized recovery coverage topics.
Evacuation plans. Preparing an evacuation plan will help executives and employees know how to proceed during an emergency. When forming the plan, assign roles to employees so efforts remain organized and controlled.
When the worst happens. After a disaster, document the damage extensively and notify your insurer immediately that damages or losses have occurred. Business owners are responsible for the safety and well-being of employees before, during, and after a disaster; if the business building is damaged, have it inspected.
Survey damage carefully and photograph or videotape all affected areas, inside and outside. If necessary, make temporary repairs to prevent further damage, such as boarding up windows or covering holes in walls and ceilings. Complete repair work after adjuster and local authority approvals.
For other specialty business operations and coverage considerations, see Fugitive Recovery (Bounty Hunter) Insurance.
Frequently Asked Questions
What is the first step after a natural disaster damages my business?
Ensure everyone's safety, document the damage with photos or video, and contact your insurance company as soon as possible to start the claims process.
What records are most important to back up before a disaster?
Keep copies of insurance policies, bank account information, leases, recent tax returns, sales records, and inventory lists stored off-site or in secure cloud storage.
How does business interruption insurance work?
Business interruption insurance can replace lost income and help cover ongoing expenses while a business is closed due to a covered disaster, based on documented past income and expenses.
Can I make temporary repairs before an adjuster arrives?
Yes; take reasonable steps to prevent further damage (such as boarding up windows) and keep receipts, but avoid permanent repairs until you have approval from the adjuster and local authorities.