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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.
THE I.I.I. IS A NONPROFIT, COMMUNICATIONS ORGANIZATION SUPPORTED BY THE INSURANCE INDUSTRY.
Insurance Information Institute, 110 William Street, New York, NY 10038; (212) 346-5500; www.iii.org