An important factor in your business assessment is whether you own or lease. You should know how much it would cost your company to shut down for one week, one month, and six weeks. Also, build up a cash reserve that will allow the business to function after a disaster. Carol Chastang of the SBA offers these tips as well:
- Determine your greatest risk potential. It could be wind damage or inland flooding that typically follows a tropical storm’s heavy rains. Financial losses could result from road closings after a hurricane. All businesses are vulnerable to costly losses when a power outage occurs, so having a plan for when you lose power is a good idea. Look at the building—inside and out—where you do business, and assess the disaster risks. Done early enough, an assessment allows you time to do structural upgrades, such as installing impact-resistant doors and windows, that could prevent or minimize storm damage.
- Ask about insurance coverage. Is your policy adequate in light of your risk? What is and is not covered, such as business interruption income? Most property insurance policies do not cover flooding, yet apart from drought, floods are the leading cause of natural disaster losses in the U.S., according to the U.S. Geological Survey. At FloodSmart.gov you can learn how to buy a flood policy, what is and isn’t covered, and how rates are determined.
- Make sure you back up your data. Store your financial records, tax documents, and other vital records off-site.
- Find an alternative location. Depending on your finances, consider an alternative site where you can relocate your company if a disaster forces you to close your main location indefinitely.
Kevin Kerridge, director for small business insurance at Hiscox, a Bermuda-based specialty insurer, suggests entrepreneurs consider purchasing business owners insurance for several reasons, including if they have computers, printers, and furniture, as well as if they own and regularly work with large amounts of data. Kathy Bromage, senior vice president of strategy for small commercial insurance at The Hartford, a Hartford, Connecticut-based insurance company, adds “it’s important to work with a qualified independent insurance agent who will take the time to understand the unique needs of your business and help ensure that a specific policy meets those needs.”
Buying Business Insurance
Entrepreneurs running a business should be prepared to cope with unexpected losses. Insurance policies cover just about every risk a small business could face including that of property damage, disasters, theft, vandalism, and other sudden events. Commercial insurance, also known as business insurance, can help protect businesses from the losses that often result from such misfortunes. Here’s what you need to know about the various policies:
Business Owners Insurance is one convenient package that comprises liability insurance, business equipment, and personal contents, and may also include coverage for buildings and vehicles. Additional protection may include crime insurance, which covers the loss of money or securities resulting from burglaries or hazards as well as losses from employee theft or embezzlement; and business interruption insurance, which covers losses that result from having to suspend operations or reduce production for a time. This coverage provides compensation to offset lost profits or to pay continuing expenses such as rent and payroll, typically for up to a year for insured losses. Not only does business owners insurance cover losses in case of fires, hurricanes, and break-ins, it also covers lawsuits.
Commercial Property Insurance covers a company’s physical assets including buildings, equipment, inventory, computers, and records damaged by an insured cause of loss. Property policies typically do not cover loss or damage due to floods. Flood insurance is sold separately; visit the National Flood Insurance Program at FloodSmart.gov.
Data Breach Insurance addresses the loss and theft of sensitive customer or employee data, a growing risk for small businesses because of the increasing popularity of mobile devices and the greater sophistication of hackers.
General Liability Insurance protects you against claims of bodily injury or property damage by someone at the business. This is important coverage if you or your employees visit off-site locations, like training, conference, or event spaces. Even home-based businesses need liability insurance.
Professional Liability Insurance protects you against disgruntled clients filing suits that claim negligence, errors, or omission on your part while you performed your services.