Don’t Let the Weather Put Your Company Underwater
Many climatologists expected an unusual warming of the Pacific Ocean (known as an El Niño) to have a dramatic effect on weather patterns in early 2016.1 These warnings may have prompted residents of southwestern states to prepare for a wetter winter. But history reminds us that most communities are vulnerable to some kind of large-scale disaster such as a severe storm, tornado, or flood.
Small businesses can be hit especially hard when extreme weather or an isolated event (such as a fire) results in damage and/or forces a temporary closure. According to the Federal Emergency Management Agency (FEMA), nearly 40% of small businesses never reopen after a disaster, and another 25% fail within a year.2
For the sake of survival, it’s important to identify the potential risks that threaten your business, create a thoughtful disaster plan, and have adequate insurance.
Perform necessary maintenance. Inspect your facilities for safety or fire hazards and repair deficiencies (such as a worn-out roof) that might not withstand harsh weather.
Create or update your disaster plan. Review the details with employees and stage regular drills to reinforce and test the effectiveness of the plan.
Preserve critical records. Good documentation may speed up the claims process. Keep an accurate business inventory and take photos of the premises and business property. Store these and other financial records offsite (and/or online), along with the phone numbers of employees, key customers, suppliers, and vendors so they can be retrieved from a temporary location, if needed.
Review your insurance coverage. A business owner policy (BOP) typically includes coverage (up to policy limits) for property damage, liability, and business interruption. Property insurance helps protect a company’s buildings and equipment against a specific list of perils. Business interruption insurance helps cover lost profits and operating expenses that may continue while a business is closed because of a disaster.
Water damage could cost tens of thousands of dollars. Flooding is typically excluded from standard commercial and business owner policies. Separate coverage may be purchased from the National Flood Insurance Program or from private insurers.
Some businesses face unique risks that may require more customized coverage than a standard BOP. An annual review may help your insurance keep up with your company’s changing needs.