Frequently Asked Questions on Disaster Mitigation
In a recent post, we shared the most common questions the U.S. Chamber of Commerce Foundation receives through its Disaster Help Desk for Business. In this post, we will primarily focus on disaster mitigation and insurance policies.
As the U.S. Chamber Foundation’s resource for small businesses facing a disaster or aiming to be better prepared to withstand a disaster, the Help Desk team’s advice and services are free to small business owners. We hope these FAQs offer you pertinent information on what a disaster could mean for your business and how the Help Desk can assist you, now or in the future.
What Are the Most Important Things I Should Do to Prepare My Business?
This is probably the most critical question you could ask if you want to protect your small business from the risk of disasters. Though small businesses are the engine of our local economies, 43% of businesses that are affected by a disaster will never re-open.
Preparedness measures can help lessen the impact and financial stress when a disaster strikes. Here are the three most crucial steps to take to prepare your small business for disaster and mitigate your risk.
- Determine what is most critical to keep your business open. Is it your server and computers, machinery, physical inventory, or the ability for employees to access your physical location? You probably have a few mission-critical operations that should become your risk-reduction priorities. Go through a planning process to understand exactly what you would do to reinstate those operational priorities once the disaster is over and you want to re-open. If you know what your priorities are, you will make smarter decisions during a stressful time.
- Educate yourself and decide which insurance policy option is best for you. When you know the priorities that your business needs to survive and re-open, then you know what to insure. Having an insurance policy that covers every aspect of the business can be cost prohibitive. Insurance policies have options for different hazards, so talk to your agent about your mission-critical business priorities. For example, business interruption insurance and key person insurance are often overlooked, but could provide important protections that help sustain a business in the aftermath of a disaster. Also, ask your agent to walk you through the various add-on options, such as earthquake or flood riders.
- Take action. We urge small business owners to not wait for a disaster to threaten their business before they decide to hone in on disaster risk and mitigation. Taking protective measures, such as the two steps above, is smart business.
Does Anyone Help Fund Preparedness/Mitigation?
One of the frequently asked questions the Chamber Foundation team gets from businesses focuses on how to access federal money for disaster aid. If federal Small Business Association (SBA) money is available in your community due to a presidential disaster declaration, then your business should apply for the assistance by the SBA deadline. The SBA provides low-interest loans to business owners who have applied and qualify. Even if you’re not sure you would accept an SBA loan, apply by the deadline anyway and keep your options open.
Once an SBA loan is received, a portion of it can be used for your business’s mitigation efforts as protection from future disaster threats. Typically, this portion is around 20%, with the remaining 80% funding your business’s recovery related to your physical structure (ex: structural damage) or economic injury (ex: customer base has relocated or cannot get to you, product or service not needed in community, loss of inventory to sell or employees to work).
Your business insurance policy is your first line of protection if your business is struck by a disaster. A significant piece of any disaster-mitigation plan is to review your business’s top vulnerabilities and then review your insurance policy to understand which vulnerabilities are covered and what your insurance company will need from you in the claims process.
Read on to better understand what to do with your insurance policy when disaster strikes.
What Do I Need to Know About Disasters and Insurance?
The first thing you should do if your business is affected by a disaster is to contact your insurance company. Do this right away, before following your natural instinct to go right into fix-it mode. This holds true whether the disaster is large-scale and creates a scenario in which federal assistance is available, or smaller-scale only affecting one or a few businesses.
Your insurance company will need records, photos, and more in support of your claim. Understand what they need from you and take care of these details first, before diving into clean-up. This will help you with your insurance reimbursements.
Without business insurance, your options may be limited to using a “rainy day” savings account, borrowing from family or friends, or using credit cards that often come with high interest rates. Most small businesses do not have emergency savings that are adequate for overcoming a disaster. This reality makes it all the more important that critical aspects of the business are insured, even if it is cost-prohibitive to insure the whole business.
It’s human nature to think—or, more accurately, hope—a disaster will never happen to us. But it can happen to anyone and any business. Learning from these Help Desk FAQs could help you fortify your business in key ways, no matter what the future brings.
If you still have unanswered questions about disaster mitigation and preparedness, please contact us. It’s no cost to any business owner and the Chamber Foundation’s Help Desk team would be happy to talk through your specific scenario and concerns.