I.I.I.: Businesses Should Assess Their Readiness for Earthquakes and Other Natural Disasters

Federal Government Estimates Two of Five Enterprises Do Not Reopen after Disaster Strikes


For immediate release
New York Press Office: (212) 346-5500; media@iii.org  

NEW YORK, July 9, 2019 —The 6.4 and 7.1 magnitude earthquakes which struck near Ridgecrest, Calif. late last week are a reminder of a natural disaster’s ability to disrupt a business’ operations, according to the Insurance Information Institute (I.I.I.). 

The natural disaster threats to a business depend upon its location, and include hurricanes, tornadoes, and wildfires. Forty-plus percent of U.S. small businesses do not reopen after a disaster impacts them, the Federal Emergency Management Agency (FEMA) estimates. Nonetheless, by taking measures to prepare, businesses can increase their chance of recovering financially from a disaster which adversely impacts its operations.

The I.I.I. recommends businesses take the following steps in the aftermath of this month’s southern California earthquakes:

1. Review Your Insurance Coverage: It is important your business has the right amount, and types, of insurance for its needs and risk profile. There are two types of policies you can buy as a business owner. Earthquake risks must be considered separately.

  • A Businessowners Policy (BOP) is commonly purchased by small businesses. BOP policies combine property, liability, and business interruption coverages in one policy and are usually less comprehensive than a commercial multiple peril (CMP) policy. Business interruption coverage, also known as business income insurance, reimburses a business owner for lost profits and continuing fixed expenses during the time a business stays closed because of a covered event, such as a hurricane, tornado, or wildfire.
  • A Commercial Multiple Peril (CMP) policy combines several coverages—such as property, boiler and machinery, and general liability—into a single policy. It is typically less expensive to buy a CMP policy than to buy these coverages individually. Boiler and machinery insurance, also known as Equipment Breakdown Insurance, also usually extends to air conditioners, heating, electrical, telephone, and computer systems.
  • Commercial Earthquake Insurance Is Sold Separately: Earthquake-caused property damage and business interruption is not covered under either a standard BOP or CMP policy. Businesses in earthquake-prone parts of the U.S. must consider a separate policy or an endorsement to an existing policy which specifically mentions earthquake-caused damage.

2. Develop a Business Recovery Plan: The I.I.I. outlined the steps for developing a small business disaster recovery plan. Moreover, the Insurance Institute for Business & Home Safety (IBHS) offers a free, customizable toolkit to help businesses plan for any type of interruption.

3. Create a Business Inventory: The document should list your business’ equipment, supplies, merchandise, and commercial vehicles. The inventory also facilitates the filing of a business insurance claim

In addition, the I.I.I. has an online library on the key types of business insurance a business owner should consider purchasing.

The I.I.I. has a full library of educational videos on its YouTube Channel. Information about I.I.I. mobile apps can be found here.


Insurance Information Institute, 110 William Street, New York, NY 10038; (212) 346-5500; www.iii.org

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