A.M. Best Company, which rates the strength of the insurance industry, reports that the number of natural disasters this year is greater than it has ever been. Irene hit when businesses and homeowners already absorbed heavy tolls on their budgets, and their reserves are lower than usual.
The Importance of a Quick RecoveryIf you have a small business affected by a natural disaster such as Irene, quick action is essential, according to Donna Childs, a recognized authority on risk management. It is going to be hard – it is traumatic to witness the devastation such a storm can bring. But, Childs says, if you don’t get things up and running as soon as you can, you may not get them up at all. A study of small businesses affected by the World Trade Center bombing in 1993 found that companies that could not get up and running within five days went out of business within a year.
Contact Your Insurance Company Immediately
To help with insurance claims, you also need to show the insurance company that you did what you could to contain or reduce your losses, such as maintaining sprinkler systems. If you stand by and allow the situation to get even worse because of action you could have taken but didn’t, you may have problems with the insurance. You also should document the expenses for everything you did to contain damage, which you can claim as well.
Also, check over all of your insurance policies to see what they cover connected to natural disasters. There may be coverage in some of your policies of which you may not be aware. Childs recommends that you look at first-party property loss policies that cover property damage, which includes collateral damage and indirect property damage. Also look at all-risk policies, peril policies, business owner policies, and policies covering particular endorsements.
Most business policies require that the policy holder notify the insurance company promptly of any damage claims, so make sure you file your claims in timely manner.
When you do report damage, just describe what the damage was, don’t try to also figure out the cause, or you may risk losing coverage. For example, when one home-based businessperson lost the use of her computer during the World Trade Center attack, she assumed it was because of an electrical power outage, and reported that. But this was not covered, and so her claim was denied. The real cause was soot and ash blocking the fan on her computer, which was covered.
Also, another safeguard against natural disaster is having a business line of credit, according to Ramit Arora, president of Biz2Credit. It can help your business through tough times. And, if you pay it back promptly, it will have the collateral benefit of improving your credit rating.
Handling cash flow effectively can also be a big help in getting through a natural disaster. Arora counsels keeping a balance between accounts payable and accounts receivable. And try to always keep some cash reserves for when unforeseen things happen.