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You may have no way of knowing when or if a disaster might strike, but that doesn’t mean you shouldn’t be prepared.
When Hurricane Katrina hit in August 2005, it became the most costly catastrophe in United States history. Many business owners couldn’t financially survive after the destruction the Category Five hurricane caused. When Elmo Spellman, ABOC, owner and president of Esplanade Optical in Metairie, La., got warning that the storm was coming, he did everything he could to prepare his practice. “I came to my shop and picked up everything humanly possible in case of a flood, boarded the windows for wind damage, and secured as much as possible,” he says. “I secured records and frames, and raised furniture and displays off of the floor, as high as I could get them. And I took as much with me out of the shop as I could.”
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When Spellman assessed the damage after the hurricane, it became apparent that a long road to recovery was ahead. “We had 12 to 18 inches of water in the shop plus wind damage to the ceiling,” he recalls. “The shop was also filled with mold, mildew, and stagnant mud and dirt. Many of the frame displays and furniture were damaged and had to be discarded.”
Spellman spent three months working out of his home and trying to retain as many of his customers as possible while preparing to reopen his shop. He got the word out that he was operating out of his home. When he did reopen, the biggest challenge was trying to regain his formerly robust client base. While business is better today, Spellman says the combination of the financial loss his local clients suffered, plus the current recession, has prevented him from getting back to where he was pre-Katrina. But he’s been much more successful than some businesses that couldn’t even get back on their feet. He says the difference came down to insurance. “Having good insurance is the number one key,” he stresses.
Crucial Coverage
To prepare for a hurricane or any other potential disaster, the Insurance Information Institute (III) recommends being very familiar with your insurance coverage. Don’t wait until disaster strikes to realize you don’t have enough coverage. You should understand what your policy includes—and what it doesn’t.
“Be sure to read your policy thoroughly,” advises M. Beth Parquette, president of Parquette & Associates Insurance Services, an agency based on the South West Coast of Florida—about three miles north of where Hurricane Charley did some major damage. “If there are some things you don’t understand, make a list and call your agent. That’s what they’re there for. Also, pay particular attention to the coverage’s afforded to you under your policy and also the exclusions, such as windstorm and hurricane coverage. If you find these things are excluded, call your agent and ask why and where you can obtain this coverage.”
It’s important to realize that typical property insurance policies do not cover flood or earthquake damage. If your business is based in a flood or earthquake zone, you need to consider this additional coverage. “If you are in a state that is prone to sink holes or earthquakes, which are most often excluded from a business owner’s policy, find out how you can ‘buy’ that coverage back,” adds Parquette. “Similarly, if you are in an area prone to flooding, make sure that you have current flood insurance.”
It’s also crucial that you have enough coverage for the indirect costs relating to a disaster such as the disruption to your business. “Make sure that you have ‘Business Income Coverage’ and that the limit of coverage and/or time frame of that coverage will enable you to keep on paying for your rent or mortgage, key employees’ salaries, utilities and other on-going expenses or additional expenses you may incur, such as moving to a temporary location while repairs are being made,” advises Parquette.
The III also recommends developing a written emergency response plan that employees are familiar with. Employees should know what measures to take to preserve life and limit property losses. The Federal Emergency Management Agency’s (FEMA) website has some great resources for developing a disaster plan for your business
(http://www.fema.gov/plan/index.shtm).
When the Storm is Brewing
Most business owners buy insurance policies that cover a natural disaster with the hope of never having to use that coverage. But in the case that a catastrophic event is actually coming, and you’re able to get some advanced warning, the hours or days leading up to it can make a big difference in your level of preparedness. By paying attention to the storm warnings for Katrina, and taking them seriously, Spellman was able to prepare his shop as best he could before the storm actually struck.
While you can only do so much to prepare, Parquette says doing what you can does make a difference. “It’s always important to take everything off the floors and move items away from any building openings,” she suggests. “Make sure you have secured your office equipment in a safe place. And, if necessary, make sure that you have storm shutters or window protection and that the drainage areas around your building are free of debris.”
It’s also crucial to make sure that all important documents, including your business owner’s insurance policy, are in a secure, waterproof bag or box that you can take out of the store. Parquette also recommends having cell phones charged and ready to go, and ensuring that you turn off the electricity before leaving your building. “And of course, make sure that no one goes back to your office during or after the event, until the authorities have announced it is safe to travel,” she emphasizes.
The Aftermath
The aftermath of a natural disaster can be overwhelming, but the sooner you start taking the necessary steps toward recovery, the better. Parquette says that downed phone lines can make it difficult to reach your agent if they are based in the same area as you, so it’s important to have the phone number for the claims department of your carrier in advance. “More often than not, they will not be in the area affected by the event and you can call them directly to report your loss,” she says. “Make sure to have your insurance information and proof of ownership of items in your office ready to supply to the adjustor.”
As far as proof of ownership of items, it’s always best to have the receipts available but business owners can also have photos of those items that are missing a receipt. After the storm, Parquette also advises clients to take photos of their place of business and keep them in a lock box in the bank along with any receipts for new purchases, replacing lost or damaged items. This can help speed up the claims process. “It may take some time for the adjustor to get to you, especially if there were a lot of areas damaged,” she admits.
Though it may take some time before you can even return to your place of business, once you do, it’s important to secure the business as best as possible to prevent theft or further damage. Re-board windows, add locks where you can, and take any remaining critical items out of the store and to a safe place. Patient records, office equipment and merchandise are likely the three most important items to secure.
While the thought of preparing for an unknown disaster can be stressful, the more you do in advance, the better off you’ll be in the long run. Parquette says the simplest way to think of it is to treat your business as you’d treat your home. Preparing for the worst will give you the peace of mind that you did everything you could—to the best of your ability—to protect your business.
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