Now is the time for small business owners to prepare for possible disasters by reviewing their business insurance policies.  Because you never know when disaster will strike, here's a checklist from the National Association of Insurance Commissioners.

General Planning

• Is your business ready for disaster?
  • Do you have an emergency plan for employees and customers?
  • Do you have copies of important papers and information stored off site?
  • Does the information include: receipts, photos, insurance policies, contact details for your agent or company, employee roster, etc.?  These documents will help you when you file a claim later.
• Minimize your insurance risk by:
  • Installing fire and security alarms.
  • Planning and training employees for emergencies on the premises, such as fires and evacuations.
  • Having employees keep wallets and other personal items in a secure place. Keeping the business' cash and other valuables in a safe.
  • Keeping office space in good condition.
• Review your insurance needs and current policies:
  • Are your policies up-to-date with your insurance coverage needs and are the limits for each coverage at a level that protects your investment?

Property Insurance

Your property insurance covers you for damage or theft of the physical property and equipment of your small business. If you own the physical structure of your business address, your property insurance should cover both the structure and its other assets.  If you lease the space you occupy, you are responsible for insuring your personal property/contents. 

Here are a few things you should know about your property insurance policy:

• Know what losses (hail, wind, etc.) are covered.
• Check to see if your property will be replaced for the actual cash value (ACV) or replacement cost.  ACV reimburses the cost to replace, rebuild or repair damages, taking depreciation into consideration.  Replacement cost does not factor in depreciation.
• Flood is not a covered peril in a standard business property insurance policy.  You can purchase flood insurance from the National Flood Insurance Program.  Normally, you have to wait 30 days for a flood insurance policy to go into force.
• Consider any improvements to your business or the neighborhood that have been made since your property was last appraised.  If there are changes, it may be time to update your policy.
• What is your limit of liability or the maxiumum amount insurance will pay for covered loss?

Business Interruption

Business interruption insurance covers lost earnings due to circumstances that shut down your business for an extended period. Business interruption covers expenses associated with running your business, like your payroll and utility bills, based on your company’s financial records. Business interruption may also help pay for the extra expenses to keep your business in operation until you recover.

A few things to check in your Business Interruption/Continuation policy:

• What expenses are covered and is the limit adequate for the amount the policy will pay out?
• Benefits under this kind of coverage may not be payable for a certain number of days after the business interruption has occurred. Check to see if your policy has a waiting period and make sure you have sufficient funds to tide you over for that time.

Liability Insurance

Liability insurance, also called Commercial General Liability (CGL), covers four categories of events for which you could be held responsible: bodily injury; damage to others’ property; personal injury, including slander and libel; and false or misleading advertising.

A few things to Check in your CGL:

• Medical payments are generally a separate coverage section of a CGL policy and generally have a separate stated limit. If a customer is hurt on your premises – whether you are responsible for the injuries or not – your medical payment limit is the amount your policy will pay for their immediate care and treatment. Check your medical payment limits and decide if this amount is enough for your needs.
• A commercial umbrella liability policy provides extra protection above a standard CGL policy. An umbrella policy will have its own terms and limits, so make sure to review it closely to see when it kicks in over your standard CGL policy.
• Premiums for your CGL may be impacted by the addition or reduction of employees, clients product offerings or inventory; alterations to your building; or changed state regulations. If any of this has changed, talk with your insurance agent or company to reevaluate your policy and premiums.

Workers’ Compensation Insurance

Workers’ compensation insurance protects a business owner from claims by employees following a work-related injury or illness. It generally covers an employee’s medical expenses, rehabilitation costs and lost wages. Most companies are required to carry workers’ compensation insurance.

Use this checklist to help keep your workers safe:

• Is the office space in good physical condition? Is there anything that would impede workers from taking shelter or evacuating in an emergency?
• Review emergency procedures with your employees.
• Comply with safety requirements that can limit work injuries.
• Understand the terms of your workers’ compensation insurance policy.

Commercial Auto Insurance

Automobile liability insurance – required by most states – covers medical expenses for injured persons and damages to the property of other individuals as a result of a motor vehicle accident caused by the insured’s negligence.

Here are a few things to check in your auto insurance policy:

• If you are relying on either a personal auto insurance or personal umbrella liability policy to provide you with protection for your company’s use of vehicles, look closely at the provisions, as business-related liability may be excluded.
• Is your policy up-to-date on all business vehicles? Does the policy reflect up-to-date information on: where you garage the vehicle, who drives it, your liability limits and deductibles?

Information from National Association of Insurance Commissioners