If your business is damaged or destroyed by a disaster, how long would it take to get back to operating again? Natural disasters are not your only danger—as buildings catch fire and even an isolated frozen or broken pipe that bursts over the weekend, but is not discovered until Monday morning, can result in flooding that destroys inventory, equipment, floors or walls. The damage caused by any of these events can be the end of business as you know it. Research shows that 25 percent of businesses that close following such events do not reopen, and many that do struggle.
The solution is preparation, with a plan to get back to business after any type of disaster. This includes the smallest of home-based businesses. The place to start is to determine if you have adequate insurance. Your agent can review coverage with you, but coverage for floods or earthquakes will need separate policies. Business interruption, which covers business income and extra expense, should be reviewed. You might not be able to get back to business for weeks or months, but even being closed for just a few days will have an impact on revenues and income.
Business income provides coverage for up to 12 consecutive months for loss of business earnings or loss of rental income due to the necessary suspension of your operations during restoration. Coverage begins 72 hours following the time the loss occurs, but for an extra premium, that waiting period can be removed. In addition, there are 60 days of coverage for ordinary payroll expenses and up to 30 days of extended business income coverage starting from the date operations resume. The number of days for each type of coverage can also be increased for an extra premium.
To assist with plans to protect your business from natural disasters or any kind of interruption, there is a toolkit available for small and midsized businesses. The booklet, called Open for Business, provides forms to use and tips to ensure a disaster does not close your business. It was prepared by the Institute for Business & Home Safety (IBHS), a nonprofit initiative of the insurance industry. To find out if your insurance company is an IBHS member, go to ibhs.org. Your agent can order this guide for you.
There are increasingly good reasons that every business and homeowner be prepared for disasters. The average number of disasters in this country per year is three, but 2011 was the worst in history with 10, as reported by the National Oceanic and Atmospheric Administration. Most likely, this year will be another record breaker because of the number of wildfires. The National Interagency Fire Center reports that U.S. wildfire activity in 2012 has surged to 7.7 million acres burned, which beats the 10-year average of 5.8 million acres. Of course, acts of nature are way beyond our realm of control, but proper recognition and preparation are not. iBi