How to Fully Prepare Your Small Business for Natural Disasters


A report by FEMA shows that 40 percent of micro-businesses close up after a natural disaster. That explains why companies need to secure the correct type of insurance. Here is expert advice on micro-business trends that hinder adequate coverage according to attorney Brandon J. Clapp of Swift Currie’s Insurance Coverage.

“Micro-businesses are generally more defenseless to natural disasters because most of them lack adequate capital to recoup losses due to natural calamities,” Clapp explains. Plus, most of these young companies do not have the resources to re-establish themselves after a disaster. Damages and losses from natural disasters can be detrimental more so to small business owners who still rely on small low and high risk business loans.

He adds that a 2013 study by The American Sustainable Business Council discovered that small companies lost around $3000 per day, each day they closed operations after a natural disaster.

Protecting Your Small Company

Reviewing your existing policies with legal professionals to confirm what risks you’ve covered your firm from is the number one step to preparing for the worst case scenario.

Clapp adds that SMBs should concentrate on finding which policies are made to cover their needs.

“This is important because small businesses face different risks and have varying tolerances for those risks. A complete review should cover perils, property, limits, deductibles, and exclusions.

Clapp explains that there’s more to the coverage process than “getting good insurance.” Insurance can be costly that’s why you want to make sure you are only paying for the coverage you need.

Insurance for Natural Disasters

Expect to sort through a lot if you’re considering all the different coverages available for micro-businesses. The main category is the range of plans under the title “Property Insurance Policies.”

Also, small business should note here that most plans exclude flood coverage— which means most times they’ll need a dedicated insurance policy to cover that risk.

Coverage for Property and Building

Micro-businesses should have a plan for Property Damage or Physical Loss.  This is one of the most critical coverages since it covers any physical damage or loss including equipment, raw materials, inventory, and buildings.

Small business owners should secure this policy to get finances to rebuild, repair or replace whatever has been damaged by natural calamities.

More Coverage to get you back on your feet

You also need a cover for Generators/back up power, cleaning services (after a tornado or hurricane) and lost Profits

Extra Expense Coverage, like the name suggests, protects your company from the additional expenses that go beyond the average operating cost after a disaster.

Lastly, Business Interruption Coverage is a plan designed to help cover profit and income losses caused by natural disasters.

In a nutshell

When planning for natural disasters, assessing your small firm’s risk profile should be the starting point in determining the types of coverage you need.

Author Bio: As the FAM account executive, Michael Hollis has funded millions of merchants through High risk business loans. His experience and extensive knowledge of the industry has made him finance expert at First American Merchant.

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