Review Your Insurance Before Disaster Strikes
By Kristi Vaughan
Emergency management officials in North Carolina estimate that one of every six businesses adversely affected by Hurricane Floyd in 1999 was either underinsured or not insured at all. For those businesses, once disaster struck it was too late to realize they didn't have sufficient insurance coverage. You don't want to make the same mistake.
Just as with your homeowner's, life, health and disability insurances, you should periodically review your business insurance coverages to ensure that they still meet your needs.
What insurance does a business need?
The first step to getting proper insurance is to determine the risks your business faces. Because business insurance can be even more complex than personal insurance, the federal Small Business Administration recommends that you get professional guidance as soon as possible.
Property insurance typically covers damage to the buildings and their contents. Liability protection covers legal responsibility for any harm to others caused by your company. Business interruption insurance and extra expense insurance cover lost income and the extraordinary expenses of starting up again after a disaster. You may also need coverages for vehicles, health and disability.
Among the questions you will want to consider:
- What property does your business own or rent?
- What equipment is used? Will this equipment be covered under a standard policy or do you need additional coverage?
- Do you need auto insurance for vehicles used in your business?
- What about professional liability? Do you have an exposure?
- How will you cover the costs of operating if disaster wipes out your primary location?
To further help you determine your needs, the Insurance Information Institute offers an Insurance Checklist for Business Owners (pdf).
Home-based businesses
Many small businesses operate out of the owner's home. While this arrangement is convenient to the business owner it doesn't guarantee insurance coverage for the business.
Most homeowner's policies provide minimal coverage for business equipment. To better guarantee coverage you may want to consider an endorsement to your homeowners' policy or purchasing a separate business policy. Your insurance agent can help you determine what is best.
Not all hazards are covered
In reviewing your insurance coverage, make sure you take special note of what is not covered. Floods and earthquakes, for example, are not covered by most property policies. Special coverage is needed for those hazards. Similarly, if business clients are coming to your house, your homeowners insurance may not cover the liability. And does you auto insurance cover the possibility of driving clients around?
The best insurance is the insurance that covers the disaster that strikes. Before that happens, its best to be prepared.