Many business owners in the Oklahoma cities of Moore and El Reno, which were both hit by massive tornadoes in the last two weeks, are now facing the challenging and frustrating task of rebuilding their businesses in the aftermath of a destructive natural disaster. (For more on the predicted weather damage for 2013, check out "Rain or Shine? Either Way, Weather Likely to Cause Damage in 2013.")
News outlets have estimated that the damage from the Moore tornado alone will cost as much as $5 billion. The good news: Most of those losses, it seems, were insured. The bad news? Thanks to the nature of the storm, more than a few business owners are having trouble tracking down the policy paperwork that proves they have coverage.
Here’s a look at some of the most common challenges business owners face with their insurance after a natural disaster and how you can prevent them from slowing your recovery.
Post-Insurance Purchase: Prepare for Natural Disasters
While buying business insurance is key to weathering the destruction and property damage that a natural disaster can cause your business, your preparations shouldn’t end with the purchase of a policy.
Once you’ve signed on the dotted line, be sure to do the following…
- Create hard and digital backup copies of your policies. Hard copies should be kept both onsite and somewhere offsite, such as in a security deposit box or another location that will be insulated from damaging storms. If and when a disaster destroys your building, you’ll be able to access your policy and thus more quickly follow the procedures necessary to secure the coverage that will help get your business back on track. Digital copies stored in the cloud should be accessible anywhere you can secure Internet access, and may provide an essential point of reference in the event of widespread property damage.
- Verify your Business Interruption and Contingent Business Interruption coverage. Property Insurance will help you replace equipment and rebuild premises damaged by a covered natural disaster, but it won’t provide you with a way to maintain your revenue while you’re in the process of making repairs or replacements. Luckily, you can endorse (that’s insurance speak for “modify”) your General Liability Insurance or BOP to include Business Interruption coverage and Contingent Business Interruption coverage. The former pays you if and when a covered event prevents you from opening your business doors and bringing in revenue through normal channels. The latter pays you when one of your partners or suppliers is prevented from operating because of a covered event. Together, they can help ensure your revenue regardless of events beyond your control.
- Double-check your contracts for partner and supplier coverage. So what happens when you have Contingent Business Interruption coverage but your supplier doesn’t have any insurance at all? You may be able to receive compensation for a limited time, but unless you’re able to find a reliable and reasonably priced replacement supplier quickly, you could be seriously scrambling for someone to provide you with the materials you need to serve your clients. To prevent a situation like this, verify that the contracts you use require your partners and suppliers to carry insurance that will keep them from going under unexpectedly.
Can’t You Just Use Your Insurance Provider’s Copy of Your Policy?
Eventually, you may be able to. But do you know your policy number offhand? What about the contact number of your agent or provider? What about your agent’s name? If you don’t know this information off the top of your head, it could be tricky to convince your provider to cut you the check you need to fix your roof.
And if your business is hit with damage from a major natural disaster, chances are you won’t be the only business owner without ready access to important paperwork.
So while you may ultimately be able to get coverage without having access to a copy of your policy, it will most likely take much longer to receive benefits than it otherwise would have. And when you’re unable to operate your business because you need insurance benefits, even a few days’ delay can translate to major losses.
Bottom line? As with most things, when it comes to preparing your business for a disaster, it’s better to be safe than sorry.