Insuring for Resiliency

By Michael Heckman

When disaster or disruption strikes a small business, the right insurance can separate those that survive from those forced to close their doors permanently.
The difference, however, is more than having insurance: It is insuring for resiliency, rather than simply insuring against loss. The latter may leave you with a check, but without a future livelihood. Worse yet, it may actually cost your organization more upfront.
Fortunately, neither a crystal ball nor an advanced degree is necessary to begin planning for resiliency when it comes to insurance. Instead, consider these four basic questions:
1. Do you know what categories of insurance your organization carries and what each excludes?
Most businesses already have business property insurance. This covers physical damage to assets that include your building, equipment, furnishings, fixtures, inventory, computers, records and other valuable items. Most organizations also have business liability insurance to protect them from lawsuits alleging responsibility for bodily injury or property damage to someone else.
Many also have an umbrella policy which takes over when a lawsuit exceeds the limit of coverage. Knowing and having the basics of each is where resiliency planning begins.
2. Have you shopped for business income and extra expense coverage?
Many small organizations overlook these two cornerstones of resiliency planning. Often, if a property is destroyed, it can take up to a year to rebuild and re-establish. Business income insurance reimburses you for the net income your business would have earned if your business had not been shut down (or slowed down) due to covered damage to your property.
This allows you to meet your payroll and other obligations while using property insurance to get your business back up and running. Extra expense insurance covers the cost necessary to get up and running quickly. This may include everything from renting temporary space to making thousand of copies of documents at Kinko's.
3. Do you think flood insurance is unnecessary in the Baltimore-Washington Corridor?
Flood insurance is not just for New Orleans and other coastal areas. According to Kiplinger, 25% of all flood-loss claims are filed in areas of low-to-moderate risk. Learning how FEMA categorizes your place of business is fast, free and important (visit www.floodsmart.gov); it can be found by simply entering your address.
Businesses located in zone A or B should have flood insurance, but it is also often recommended for businesses outside of those zones. If you are located near a creek, lake or river and sustain flood damage without flood insurance, your property coverage may be of little or no help.
4. Are you on a first-name basis with your insurance broker?
A trusted insurance broker can make all the difference. Work with one who either knows your industry or is willing to learn it. Help them to understand your risk and the challenges that you face. Consider them as vital to your planning as your accountant or attorney.
Brokers can do far more than help you determine the levels and types of coverage appropriate for your organization and circumstances: If the unthinkable becomes reality, your broker becomes your advocate with the carrier. They know the system and maximize both the dollars you receive on a claim and the speed with which you receive it.
While no four questions can address all of the challenges that insuring for resiliency entails, it pays to begin by thinking about recovery rather than reimbursement. Knowing your existing coverage, discovering gaps as well as alternatives and working with a trusted adviser have proven invaluable to countless small organizations. Can yours afford anything less?

Michael Heckman is vice president of business development at Towne Group in Columbia. He can be contacted at 301-977-3746 and Heckman@townegroup.net.