Disaster Strikes: WHat’s Next For Your Business?

As a business owner, you know how much time and effort it took to build your business to where it is today — the years of blood, sweat and tears invested in something that you’ve built from the ground up. You are also probably aware of the fact that many businesses have been victims of natural disasters. All those years of hard work can seemingly vanish within a matter of hours, minutes, or sometimes even seconds. The following are a few disasters that are most likely to affect you as a business owner:

• Fires: According to Angi, “Houses can take as few as five minutes to become completely engulfed in flames.” No doubt the same could be said of the brick-and-mortar storefront of your business.
• Hurricanes: The length of time that a business experiences damage from a hurricane greatly varies, but “a typical hurricane lasts anywhere from 12 to 24 hours . . . a hurricane can sustain itself for as long as a month, as Hurricane John did in 1994.”

• Tornadoes: To quote Adam Hadhazy, “Tornadoes in the EF-2 and EF-3 range packing 111- to 165-mile-per-hour winds can destroy single-family homes [or businesses], according to experts from the Insurance Institute for Business & Home Safety (IBHS). Four seconds is all a moderately powerful tornado needs to wipe a foundation clean. (emphasis mine)”
• Earthquakes: The initial damage from earthquakes also happens in a matter of seconds, but additional damage can be done via aftershocks as well. The University of Utah states that the “strong ground shaking during a moderate to large earthquake typically lasts about 10 to 30 seconds. Readjustments in the earth cause more earthquakes (aftershocks) that can occur intermittently for weeks or months.”
• Floods: Like other natural disasters, floods will also vary in length of time, but flash floods that occur with little to no time for preparation can form “within 6 hours, and often within 3 hours, of the heavy rainfall (or other cause).”

With each of these disasters in mind, and considering quickly they can cause your business to go from pristine to just the foundation, now is the time to prepare. You can’t stop natural disasters from happening, and you can’t prevent them from potentially destroying your business. What you can do, however, is be informed on what to do after disaster strikes any aspect of your business and how to be certain that your insurance covers everything you need

Every business goes through rough patches though, right? Unforeseen events and circumstances happen all the time (*gestures to all of 2020 & 2021*). Businesses are capable of rebounding when tragedy strikes, but it’s typically only because they had the right insurance and coverage.

According to FEMA and the SBA:

• 40% of businesses fail to reopen after a disaster
• Another 25% will fail within a year of reopening
• A total of 90% will fail within two years of reopening

These are staggering statistics and help shed light on a much-needed aspect of business insurance. Sadly, the majority of these businesses could have avoided being added to the above statistics had they had the right type of property insurance. So what is the right type of property insurance? It’s called business income insurance.

How does making a claim on business income insurance work? Let’s look at an example: An electrical fire breaks out and begins to spread, and 20% of the building you own is impacted before the fire can be completely put out to prevent any more damage to your business. Due to this destruction, your business cannot operate at full capacity for six months and you lose valuable customers as a result. Business income insurance will cover the lost income experienced by your business and, if the correct limit and coverage is chosen, will also pay for additional expenses such as your ordinary payroll. If you are not able to cover the payroll of your organization, you may have to lay off your employees. Without the appropriate staff, who will meet your service and production goals? Your business begins to fall further and further.

At this point, it becomes clear why 90% of businesses end up permanently shutting their doors within two years of a disaster. In addition to providing coverage for your payroll, business income insurance also includes the extra expense provision which can cover additional expenses you incur in excess of your typical ordinary expenses. A great example of this provision is if your building suffers from the previously described fire and thus your building cannot be occupied for six months. You will more than likely need to rent out another facility to use during your expected downtime. Your business income insurance with extra expense would cover the additional expenses to temporarily relocate your business to another space.

One of the essential factors to ensure that your business is in good standing to survive after a major disaster is to ensure that your business income limit purchased is adequate. This could be complicated and difficult to establish, as there are many factors that come into play and an analysis of your current coverage is needed.

Fortunately, our expert risk advisors at Tower Street can help you establish the right limit and at the right price! Not only that, but we would love the opportunity to give you an entire gap analysis of your coverage, completely free! Click here to get a quote today!