The Impact of Natural Disasters on Business Insurance Claims
If you are an entrepreneur, you are accustomed to building new ventures from the ground up. But what if everything you worked so hard to build could be taken from you in an instant?
Chances are you already protect yourself with reliable business insurance. And this coverage usually offers sufficient protection against the most common threats businesses face, including theft. However, you may not be prepared for the wrath of Mother Nature.
Natural disasters affect business insurance claims in a number of ways. How could your own company be affected, and what steps should you take to prepare and protect everything you have worked to build? Keep reading to find out.
Understanding the Risks and Impacts of Disasters on Businesses
To understand how natural disasters affect business insurance claims, you need to first understand how they affect carriers throughout the country. Disasters such as the California wildfires have taught carriers some bitter lessons, leading to increased rates and, in an increasing number of cases, non-renewal of policies. Simply put, the insurance companies in California realized they would have to scale back coverage, protecting their bottom line against the increasing amounts of property damage caused by Mother Nature.
For your own business, it is important to know that natural disasters can affect the price of your coverage and even what your carrier does (and does not) offer. Fortunately, certain carriers offer special types of insurance designed to protect your venture in the face of disaster. And this can provide the protection that companies need most when disaster strikes.
The Role of Insurance in Mitigating Financial Losses
The thing about commercial insurance is that your own policy may protect against certain disasters and not others. For example, many standard policies (including business owner policies) cover damage from hurricanes and tornadoes but not from flooding, earthquakes, or volcanoes.
One of the most common questions entrepreneurs have is “Does business insurance cover natural disasters?” In short, some (like hurricanes and tornadoes) are likely to be covered, and others (like floods) may require a separate rider or policy. Additionally, many companies will also need business interruption insurance. It is designed to cover the financial losses you may face while restoring everything after a major calamity. Without this financial protection, many small businesses are in danger because even a week of lost income may force them to go under, which is why business insurance for startups is so important.
Proactive Measures to Cut Costs
Whether you purchase business interruption insurance or a standard policy (or perhaps both) for your company, you cannot afford to just sit around and wait for disaster to strike. Instead, you must take some proactive measures of your own in order to maximize your protection and cut your potential losses.
These measures include creating a disaster preparedness plan and training all employees until they memorize it. Make sure you have first aid kits ready and have an evacuation plan that everyone understands. Most importantly, make sure you have a business continuity plan so that everyone knows what they need to do after the emergency situation has passed.
Risk Assessment and Reduction Strategies
Exactly what you do to prepare your business for a natural disaster depends on which calamity is heading your way. For example, you may want to store valuable equipment very high in the event of a flood, and you may want to designate a safe room or hallway to keep safe during tornadoes and hurricanes. Meanwhile, you will want to brace your overhead fixtures ahead of an earthquake. By knowing what types of risks you are likeliest to encounter and creating a game plan, you can better reduce damage and mitigate your financial losses.
Navigating Post-Disaster Insurance Procedures
Understandably, most natural disaster plans emphasize what to do ahead of an emergency. This kind of knowledge can help save lives, and it also goes a long way toward reducing your financial loss. However, it is equally important to have a game plan for after the emergency has passed, especially when it comes to filing an insurance claim and getting your business back on track.
Be honest: Do you know the steps to take right after a disaster? Are you aware of the documentation required for a claim and how to avoid making the most common mistakes? If not, the guide below will help provide the answers you need.
Immediate Steps Following a Disaster
After a natural disaster has passed, your first responsibility is the safety of yourself and your employees if they happen to be in the area. Make sure everyone is okay, and call the police and other emergency services as needed (for example, call 911 if there are any injuries and call the fire department if there are any fires).
Once you have checked on everyone and made all the necessary calls, it is time to get ready to file your claim. Make sure you are as calm and coolheaded as you can be at this point. That is because the next step is documenting the damage around you, and the quality of your documentation may ultimately affect whether or not your insurance pays out – and how much.
Detailed Documentation for Insurance Purposes
When it comes to filing a standard business claim after a natural disaster, you will need to document the damage. This means taking photos, shooting videos, and otherwise documenting what happened to your commercial property and equipment. You should also create a detailed list of items that have been damaged or destroyed and what it will cost to replace them. This is one reason it’s important to keep a current inventory of all your assets.
To file business interruption insurance, you need to prepare additional information, including a description of your operations and current budgets and detailed plans for your future operations with future forecasts. You will also need tax returns for the last three or more years and any audits or other financial documentation for the same time period. Additional data, such as payroll records, ledgers, sales, and profit/loss statements from the past few years, can help ensure your claim is accepted.
With today’s technology, these documents can be safely stored in the cloud – or at the very least, off premises.
Avoiding Common Pitfalls in Claim Filing
When filing for natural disaster insurance for your business, the most common pitfall is having little to no documentation. The guide above can help you avoid this fate. Other pitfalls include filing too late, filing unnecessarily, or assuming that something is covered even though it is not in your policy.
Leveraging Resources for Efficient Recovery
Whether you are relying on a commercial policy or interruption coverage, natural disaster insurance for business will not be enough to get your company fully operational again. To do so, you need to know how to leverage resources for efficient recovery. Then and only then will you be able to successfully file natural disaster business insurance claims.
Utilizing Business Interruption Coverage Wisely
After a natural disaster, make sure all employees are following your business continuity plan and working from home as needed. Schedule any necessary repairs ASAP, and do your best to communicate with anyone (including customers, suppliers, and vendors) who may be affected. As needed, seek out emergency disaster assistance that may be available in your area.
Make Sure Your Business Is Covered with Business Insurance Policy Options
Now you know more about filing natural disaster business insurance claims. This includes how to prepare for the worst, how to train your employees, and how to ensure your claim is successful. However, do you know where you can find someone who cares about your company as much as you do?
At InsureOne, we are here to protect your company from everything that could reasonably threaten it. Ready to discover how affordable a robust policy can be and ensure that you successfully stay in business? In that case, come get a quote online. Alternatively, you can also pick up the phone and give us a quick call at 800-836-2240. Finally, feel free to come find an InsureOne office near you.