How Businesses Can Prepare for and Survive Disasters

The Insurance Information Institute says that disasters such as floods, hurricanes and fires cause many businesses to shut down temporarily or close forever when they happen. In their recent research, the III found that 40 percent of businesses did not open their doors again after experiencing a devastating disaster. About 25 percent of businesses reopened but wound up closing again within a year. However, businesses can take steps to prepare for disasters before they happen. By doing this, they will have an easier time recovering financially and staying open. The III provided the following recommendations.

1. Devise a plan for business continuity. This type of plan is important for disaster preparedness and survival during a catastrophe. Every plan should be shared with employees, and responsibilities must be assigned to employees. This encourages collaboration in the event of an actual disaster occurring. In addition to this, regular drills should be conducted to test the preparedness of employees and to aid in modifying the plan as necessary.

2. Keep a copy of key information in an offsite location. It is vital to have access to important information after a disaster. Any information that is critical for business or restarting business operations should be regularly updated and stored in an offsite location. This includes electronic information, databases, printed lists and any other mediums of information. Keep a list of vendors, insurers, suppliers and all other connections. Make sure their contact information stays updated on each subsequent list.

3. Create a business inventory. Make a list of all supplies, equipment and assets. For companies specializing in selling merchandise, it is important to make a list of all types of merchandise. Be sure to list vehicles and offsite property as well.

4. Review insurance coverage regularly. Reviewing coverage before a disaster strikes is the key to minimizing negative results. Many business owners forget to update their coverage as their business grows. When this happens, the coverage they receive is inadequate to compensate for the amount of growth they experienced. It is important to review coverage at least once each year. Business owners may buy a business owner policy or a commercial multi-peril policy. BOP insurance provides coverage for liability and property. CMP coverage is more comprehensive and extends coverage to autos and inland marine areas.

5. Choose replacement cost coverage. Many policies for commercial property coverage offer cash value coverage, replacement cost coverage or a combination of both options. Since cash value factors in depreciation, many business owners find themselves falling short of money when they need to replace items. Replacement cost coverage pays to rebuild or purchase the same items at current market cost. When a business must rebuild after a disaster, an actual cash policy may not provide enough money to do that.

6. Think about getting tenant coverage. For those who rent or lease buildings, it is good to think about tenant coverage. This insurance covers the property on the premises. Furniture, merchandise, machinery and other items are covered. A building owner’s policy does not provide coverage for the contents of the building.

7. Remember to obtain flood insurance. Standard commercial insurance policies do not cover floods. They may cover water damage, which is much different than flooding. Find out about the local zone and its classification of flood risk. Any business owner with a building in a high or moderate risk area should purchase flood insurance. This coverage is available through the National Flood Insurance Program from the government. It offers a maximum of $500,000 for contents and $500,000 for the structure.

Every business owner should make a list of needs and inventory before purchasing a policy. It is common to forget certain items or details when setting up a policy in haste. To learn more about options or to review and update coverage, discuss concerns with an agent.


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