Fires happen. Floods happen. That’s why you buy insurance. But if you don’t buy your insurance right, it can be the difference between a serious inconvenience and total devastation for your business. And, insurance isn’t the only way to protect yourself.
Here are a few practical steps that can get you prepared for the worst and help you get your business up and running as quick as possible after a loss.
1) Be sure to have your property insured to “Replacement Cost.” That means you need to insure for what it would cost to replace all of your property today, not what it cost to buy the property 5 or 10 years ago when you opened your business. If you own your building, you need to be sure you keep the building insured at replacement cost too. If you rent, be sure you know what you are responsible for under your lease. For example, if you are required to replace carpeting under the lease, then you need to consider that cost when determining the replacement cost of you business personal property. You should review your property values annually.
2) Be sure to purchase adequate Business Income coverage. This coverage replaces your lost income caused by a covered loss. Often times the most significant part of a loss after a fire is the loss of income suffered because of the shutdown of the business. It can take many months to rebuild and in the meantime many of your expenses continue. For example, key employees will need to be paid (or find a job with someone else). I recommend you buy 12 to 24 months of actual loss sustained practice income coverage.
3) Develop a contingency plan. It is important to have adequate insurance, but you should also have a plan in place to allow you to get back in business as soon as possible in the event of an emergency. For example, consider arranging a mutual agreement with a competitor to share space until you are able to reopen. Also, be sure to back up your data on a daily basis. You will need this information to contact customers, vendors and suppliers after the loss. Take some time to consider what bare minimums would be required for you to operate and develop a plan to quickly get to at least that level of operation as soon as possible after an emergency.
You have worked hard to establish your business. Make sure you take a few simple steps to adequately protect it.