A natural disaster will strike no matter where you live in the United States. It’s is not a question of if, but when. But if you’re prepared, the damaging impact of a tornado, flood, earthquake or hurricane can be managed.
A recent webinar conducted jointly by the Small Business Administration (SBA) , the Insurance Information Institute (Triple-I), and the Insurance Institute for Business and Home Safety (IBHS) offered business owners valuable advice on how to plan to withstand a disaster.
Communication is key
Alejandro Contreras, Director of Preparedness, Communication and Coordination at SBA’s Office of Disaster Assistance, advised that communications planning is key to a post-disaster recovery strategy. A list of frequently updated contacts should include local media outlets, utility companies and emergency responders. You should also sign up for alerts from FEMA and local public health officials.
Make sure your records are stored electronically off-site (in the cloud) and make sure you have financial records, insurance policy declaration pages, and important contacts.
When reviewing insurance coverage, don’t forget to explore flood insurance. Flooding is the most common and costly natural disaster in the United States, causing billions in economic losses each year. About 90 percent of all natural disasters in the U.S involve flooding. And just one inch of water can cause up to $25,000 in damage, said Contreras. Flood insurance is sold as a separate policy by the National Flood Insurance Program and a growing number of private companies.
It’s important for a business to create a culture of preparedness and make sure employees understand their roles by frequently testing their business continuity plans, concluded Contreras.
The SBA offers low interest long-term disaster loans to businesses. Since mid-March, the agency has distributed about $86 billion in loans for coronavirus-related losses. To apply for a loan or to learn about the requirement visit disasterloan.sba.gov.
Loretta Worters, Vice President Media Relations, Triple-I, spoke about being financially prepared for disasters with insurance. To be sure the claims process goes smoothly, take a business inventory listing all assets, she advised. It’s also important to have records of expenses and income.
Worters went over the different types of policies available to businesses and what they usually cover. Property insurance helps protect buildings, equipment, furniture, and fixtures. Business interruption insurance (BI) can help with operating expenses during the period of restoration and includes lost net income (based on financial records), mortgage, rent and lease payments, loan payments, taxes, and employee payroll.
A business may have the option to insure its business property at replacement value or actual cash value, she said, noting the difference is that replacement value coverage can help you replace your property at market prices, whereas actual cash value coverage takes depreciation into account. Replacement value coverage costs more, but it also pays out more in the event of a claim so it’s something business should really consider.
BI is also available for civil authority, such as curfews when businesses have to reduce hours due to government orders.
Utilities service endorsement is available to cover disruption in these services to a business premises.
Worters also noted that, as part of BI, extra expense coverage will cover anything beyond the normal day-to-day operating expenses that is necessary to keep a business solvent, such as renting a temporary place of business while your business is insured or leasing equipment.
In response to an attendee’s question, Worters explained that business income losses are determined based on the business’ profit and the cost of continuing normal operations.
Worters concluded that knowing your risks is an essential element of an overall business plan. While large businesses have risk managers to help make insurance decisions, small-business owners must be their own risk manager but can also get help by consulting with an insurance professional.
Make a recovery plan and test it once a year
Gail Moraton, Business Resiliency Manager, IBHS, cautioned that one out of four businesses that close due to a disaster never reopen, yet 57 percent have no disaster recovery plan. Some small businessowners say they don’t have time or money to come up with a business continuity plan or are in denial that a disaster could wipe them out. Easy-to-use plans and checklists are available from DisasterSafety.org.
Moraton also advised that businessowners get familiar with the likelihood and potential severity of the various risks that could threaten their operations. They range from natural disasters to man-made risks, such as cyber attacks, theft, sabotage, war, and loss of key employees, among many others. Owners also should know their operations and gather information by asking staff to list key functions.
She said employees – the most important asset of any business – should be asked to provide their contact information, emergency contacts, and evacuation destinations.
Businesses need to also have a inventory of their equipment and an understanding of their finances.
Moraton said that once you’ve gathered the key information and have a plan you should update and test that plan every year. Running emergency drills annually will make sure everyone is well prepared in case a real disaster strikes.
Know your hazards
Christopher Cioffi, Commercial Line Engineer, IBHS, provided tips on how to review the hazards in your area by checking on previous years’ severe weather events and reviewing FEMA flood maps. He went over the components of the EZ-PREP plan which includes actions to take before, during and after a disaster.
For example, 72 hours before a hurricane, some of the actions the PREP plan calls for include:
- Remove or secure all debris on the property
- Review message templates for business’ website, phone recording and employee communications
- Take laptops home at the end of each day and confirm they can connect to the business’ server from home