Aug. 21, 2017 – So your home is prepared for a hurricane or tropical storm. Great! Be proud you have checked the boxes — proper preparation pays off. But what about your business?
“Most Floridians are aware of the advantages of hurricane planning for their home,” says Josh Helmuth, risk advisor at Lykes Insurance, a premier Florida-based commercial insurance firm. “But what about your business? As a reformed Florida surfer, I can tell you that the best (and biggest) waves occur during hurricane season from June 1 to Nov. 30. In other words, right now – surf’s up and so should your planning be.”
Now is the time to consider the implications of hurricane planning for your business. Two areas to focus on are insurance strategy and business continuity planning (BCP). Insurance will take care of paying you back after the storm hits and BCP will make sure that the business can operate following a loss.
Pre-storm is the time to review insurance policies to make sure they are written for your specific business needs. It’s critical to realize that once a warning is issued, insurance companies will shut down underwriting and binding of insurance, making it impossible to buy the right policy.
Most issues with business insurance policies stem from how the contracts are written (what is included/excluded):
- Replacement cost vs. actual cash value policy assignment: Cost to replace/reconstruct your buildings will be depreciated with actual cash value listed.
- Coinsurance percentage: How does this apply to your current reconstruction value? Avoid penalties with a current insurance appraisal confirming building limits.
- Business interruption/extra expense: Make certain that the correct calculation method is utilized and contingent business interruption is added if suppliers are important to your operations.
- Building ordinance & law: Building codes change regularly. Who will pay for reconstruction updates to meet the current code? Coverage is likely not automatically given in your policy.
- Flood: Coverage for rising waters/storm surge is likely not covered unless your business has separate flood insurance. Primary limits of flood insurance may not be enough to insure the full replacement cost of your building.
Insuring owned property of your business is only one aspect of disaster planning. Best practices for business owners include a Business Continuity Plan (BCP), which defines continuity of critical operations following a hurricane disaster. The plan includes such considerations as: How prepared are you for a disaster? What are your critical functions? Are the critical parts of your business able to function in the event of a catastrophe? How will they be restored? How will your business operate until functionality is restored?
Communication of the strategy to employees is vital to the plan’s success. Most plans involve transfer of equipment and inventory, specifics for protection of buildings and data records, and provision for employee availability to help with prep, including who will do what before and after the storm hits.
There are some great information sources to assist with building a BCP specific to your business. One great resource can be found on Lykes Advisors Blog, http://www.lykesinsurance.com/blog/blog-details/lykes-blog/2016/06/30/planning-for-the-unthinkable, in which Lykes EVP Mark Webb provides an overview of the five phases of BCP strategy including Initiation, Business Impact Analysis, Recovery Strategies, Implementation and Testing/Monitoring.
“Proactive business owners will plan for hurricane/disaster recovery to ensure their business will operate following the storm,” says Helmuth. “Once those boxes are checked off and a strategy is in place, get back to work! Or better yet, go grab a surfboard and hang 10.”