CHICAGO, IL - Helping businesses re-establish normal operations after Hurricane Sandy is one of the most important ways insurers can help a community get back on its feet following the devastation associated with this catastrophe.
"This storm affected much of the East Coast, disrupting a large number of business operations which could have a significant impact on the region," said Christopher Hackett, director of personal lines policy for the Property Casualty Insurers Association of America (PCI). "While most businesses have insurance to cover their buildings and equipment, many businesses hit by a disaster may not survive because they have to shut down and, as a result, they have no income for days, weeks or even months. The businesses that will weather a storm are the ones that have business interruption insurance."
The first steps businesses should take involve securing the safety of the business operations and property, but it is also important for business owners to consult with their insurance agent to make key decisions regarding damage assessments and cleanup work. For businesses forced to close due to a hurricane, business interruption insurance may help replace lost income.
"Business interruption insurance is very complicated and not everyone buys it," said Hackett. "Time frames for coverage vary from a month or two to a year or more. Individual policies will have to be examined to determine the extent of coverage and a realistic projection of the total insured loss.
"Each business affected by a hurricane should contact its insurer or insurance agent as soon as possible to verify what their policies cover and to help them begin putting together the financial and other records needed to receive payment."
Business owners should inspect their property as soon as possible and take steps to protect it from further damage. Developing a list of steps that will be necessary to get the business operating either partially or fully will be very helpful. Documenting damage to inventory, or the loss of inventory, with receipts or other information will help in the reimbursement process.
Business owners also should obtain copies of a recent operating statement or income tax return to indicate income that is lost because of a storm. Financial reports prepared by the company’s independent accountants may provide the most complete financial information for those businesses that did not store copies of their records off-site.
Other sources of needed information include tax advisors or a bank where the business obtained a loan, as well as records kept by their customers and vendors, although that information may be incomplete. The more records a business provides, the sooner claims can be settled.
While businesses are trying to re-establish operations, they should maintain a separate record of their operating expenses and keep track of extra expenses necessary to expedite their resumption of business.
Payroll is a major expense of normal operations that may optionally be included in business interruption insurance. The coverage can be purchased for all employees or just executive officers with a specific timeframe in the policy.
Many small businesses purchase "business owner" policies that include broad coverage provisions similar to a homeowners policy, automatically covering basic losses when business is interrupted.
A basic element of business interruption insurance is for extra expenses needed to conduct business in a new location, such as higher rent, equipment costs or site alterations.
Options that can be purchased in addition to a basic policy include co-insurance (like a deductible), payroll coverage for employees or officers and a specific time period for anticipated return to normal operations. A policy also may have a specified maximum total dollar amount or an agreed value – providing a specified regular payment, such as $10,000 per month, which is accepted rather than requiring voluminous financial records to be submitted to document all lost profits while the business is trying to rebuild or set up operations elsewhere.
Other options include income that is lost from renting space to another business or extra contingency expenses to cover higher prices paid to an alternate supplier when the original supplier is shut down.