Preparing: Insurance
According to the Institute for Business and Home Safety, at least 25 percent of businesses that close during a disaster never reopen, mainly because of insufficient insurance coverage.
Every business owner should review and update their insurance coverage on an annual basis. Things to consider:
- Your insurance coverage should be enough to bring your business back to full operation, meaning essential equipment and facilities should be fully covered.
- Are you "fully covered?" Most insurance policies do not cover floods, windstorms, mudslides or drainage backup. Consider also the costs of renting equipment, hiring temporary employees and restoring lost data.
- If your property is mortgaged, insurance will probably cover the lender only.
- Make sure your coverage includes demolition or debris removal.
- Business interruption insurance is specifically designed to provide assistance with payroll and inventory purchases during temporary operations in an emergency.
- Don’t assume that just because it never happened before, it never will. New construction changes the course and overflow space for streams, and heavy rains can turn a small stream into a destructive torrent. Distant events might cause local landslides or sinkholes. Imagine the worst and plan for it.
- If you live in a designated flood hazard area, purchase flood insurance from your insurance agent. If you discontinue flood insurance and a disaster affects your business, you will not be eligible for any federal assistance.
Do you live in a Special Flood Hazard Area?
The federal government created the National Flood Insurance Program for those who own property in flood hazard areas, both to alleviate the financial burden on taxpayers for disaster-prone localities, and to help with the rising cost of flood damage. Nearly 20,000 communities across the United States and its territories participate in the NFIP by adopting and enforcing floodplain management ordinances to reduce future flood damage. In exchange, the NFIP makes federally backed flood insurance available to homeowners, renters and business owners in these communities.
If you own property in a special flood hazard area, you must buy flood insurance, or else you will not be eligible for any federal assistance after a disaster. To get secured financing to buy, build or improve structures in special flood hazard areas you will be required to purchase flood insurance. Lending institutions that are federally regulated or federally insured must determine if the structure is located in a special flood hazard area and must provide written notice requiring flood insurance.
