And why 40% of businesses don’t reopen after a natural disaster
75% of U.S. businesses are currently underinsured, and that’s leaving a lot of owners (and their employees) vulnerable to natural disasters and financial emergencies. While an event like a natural disaster might seem like simply a setback, it’s often fatal to success. Over 90% of businesses fail within 2 years of being struck by a natural disaster. However, many organizations might have been able to keep their business open if they simply had the right insurance. Watch out for these threats, both natural and man-made:
1. You don’t have enough (or any) coverage to help you rebuild, re-stock, or re-staff in the case of a natural disaster
When it comes to preparing your business for a natural disaster, it can pay to anticipate the worst. Unless you know exactly how much it would take for you to completely replace your business (and get covered for at or above that amount), you could be left ‘holding the bag.’ For many businesses, a Building and Personal Property Coverage (BPP) policy can help them stay protected. BPP policies can guard against damage to or loss of your building and personal business property, as well as the personal property of others involved in your organization.
2. You haven’t updated your coverage to reflect the changing costs of growing your business
If you’ve been in business more than a few years, you’ve likely seen your costs increase across the board. From utilities to phone bills and IT infrastructure costs, most goods and services increase in price at least 3% a year to follow inflation (if not significantly more). Likewise, as your business grows, you’ll have more to lose in the case of disaster. That’s why you need to make sure that you update your policy when needed to reflect your changing coverage needs. If you ran your business from home with one employee, $50,000 in insurance might be appropriate. However, if your operation has expanded to a company with 10-15 employees, you could easily need 5-10x that amount.
3. You don’t have enough professional liability insurance to protect your business from lawsuits
Professional liability insurance, often known as errors and omissions (E&O) insurance, protects you from the errors that you or your employees may make while working in a professional capacity. Professional liability insurance is more important for some kinds of businesses, especially those that provide advice that could significantly impact a client’s life. Examples include lawyers, financial advisors, and any firm that has sensitive information about clients, or helps clients make sensitive decisions.
When determining how much E&O insurance you might need, it may help to research lawsuits and settlements involving similar companies in your industry. Basically, you want to make sure the entire price of the potential lawsuit or settlement (including legal costs) is covered, so you won’t have to dip into your own funds just to defend your business from an angry customer.
Even if you don’t provide life-changing legal or financial advice to customers, you may have lots of their personal information. That could leave you in big trouble if your company’s files are hacked, especially if those hacked files are later used to perpetuate identify theft or other financial crimes. Through no fault of your own, your business could be sued – even if you took reasonable precautions to secure your clients’ data beforehand. That’s why it’s a good idea for all kinds of businesses to consider E&O policies if they keep lots of client records, especially if those records could contain highly sensitive or private information.
If you run a business but don’t have enough insurance, you’re leaving yourself vulnerable to both manmade and natural disasters. Whether you’re hit by a tropical storm, a fire, or a big lawsuit, the right insurance can help you keep your business open without costing a fortune. To learn more staying protected from disaster, contact Avante Insurance today for a free consultation.