Next month marks the beginning of 2017’s official hurricane season. Planning ahead is crucial when it comes to ensuring that your restaurant or food service business is able to withstand a major storm or hurricane. Forecasters are predicting a hurricane season that rides along the historical average for the Atlantic: 12 named storms, 6 becoming hurricanes, and two of those strong enough to be classified as major.
From June through November business owners and managers must take a two-pronged approach to hurricane season survival: first, crisis communications, management and business continuity planning and then back up efforts with the proper insurance coverage.
Before Disaster Strikes
A crisis communications, management and business continuity plan in place will help ensure employee stability in the workplace. Pre-determined employee notification channels will be critical to disseminating information should the need arise. Business owners and managers should have employee contact information at their fingertips, while also establishing a toll-free hotline number or social media site that can facilitate communication during a storm.
Similarly, understanding each business’ individual risk is key to necessary business continuity planning. Try isolating the business risk first. Is it wind, power outage or hurricane damage? Will your business be down for a week, a day or a month? Review your business assets and make sure the operations that are most critical have built-in redundancy or are covered by insurance.
Coverage For When It Strikes
Even businesses with employee communications and business continuity recovery plans in place can suffer a setback as a result of a storm. It’s important to examine your insurance coverage in advance. There are a variety of policies to help coastal businesses recover from an event – each involving a different aspect of the restoration.
Business income coverage. Take a hard look at your business income coverage limits, which include loss of income as a result of an event – are they sufficient? Extra expense coverage often accompanies business income coverage for necessary business costs, such as setting up business in a temporary location.
Based on the risks you identified above, can you build in enough cash reserves, or will you need to rely on insurance coverage, in case of an event? Go through a potential business interruption to determine the estimated monthly costs for both loss of income and extra expenses. How long will it take you to get your business up and running again? How much can you afford to lose? Base insurance coverage needs on identified risks to ensure that any business interruption will be covered to the greatest extent possible.
Contingent business income coverage. What if your business isn’t in a storm zone, but a key supplier of your business goes down due to a storm and as a result your business can’t meet demand? Contingent business income coverage can bridge these gaps.
Ordinance or law coverage. Depending on the age and condition of the facility, when rebuilding after a storm, additional building codes may apply. For example, if your facility was built in the 1980s, new code requirements may be mandatory when rebuilding. Additionally, if a building was only half destroyed, most local municipalities will require the entire building to be demolished and rebuilt, often costing more than the insurance will reimburse.
Flood coverage. It’s important to understand that most business property policies exclude flood coverage. In addition, businesses typically buy minimum flood coverage limits, but don’t consider that floods can come from even minor storms or no storm at all.
Beware of post-storm cyberattacks. Phishing and email scams that include malware are known to increase post-storm, when companies are more vulnerable to cyber intrusion and attack. Consider cyber liability coverage if you do not already have a policy in place.
Examine deductibles. What type of deductible do you have on property coverage – a percentage or flat deductible? A calendar year or occurrence deductible? If your business has a lot of locations, occurrence or percentage deductibles could potentially be more costly. Additionally, many policies will have lower deductibles for wind and hail events than for a named storm.
Speak to an experienced insurance broker this month to ensure you are prepared for the 2017 hurricane season and the potential losses it may bring with it.