Business Owners and Disasters

What You Should Know About: Disasters and Your Business

Would your business survive after a natural disaster? Preparedness and insurance will help you reopen the doors

Three things you should know:

  1. One in four businesses forced to close because of a disaster never reopens, according to the Insurance Institute for Business & Home Safety (IBHS).
  2. OFB-EZ (Open for Business-EZ) by IBHS is a free business continuity tool designed to help small businesses focus on planning so they can quickly re-open and resume operations following a disaster.
  3. It’s not just bricks and windows - commercial data security has become more important than ever. For more information about protecting your company’s data and data equipment, visit IBHS’s page “Date Protection: A Vital Part of Business Protection.”

Nearly one-fourth of all businesses that close because of a disaster never reopen, which is why it’s crucial that you adequately insure your business and have an effective emergency preparedness plan in place.

You’ve worked hard to build your business. Now work hard to protect your investment against disasters by understanding your insurance policy and making sure you have the coverage you need to reopen even if the worst happens.

Business Owners Policy

Flood, earth movement – including earthquake, landslide and mudflow – and acts of terrorism generally are not covered by business insurance policies. However, coverage for these perils can be purchased as endorsements or separate policies. Consult your insurance agent or company representative for details. (For information about standard business insurance policies and coverage, visit our Business Insurance page).


If you wish to buy Flood Insurance, or your lender is requiring you to purchase it, contact your insurance agent or the National Flood Insurance Program. For information about the program, call (888) CALL-FLOOD or visit Flood Insurance can be purchased through the National Flood Insurance Program or some private companies.


Coverage for earthquake damage is excluded in most property insurance policies, including Business Owners package policies. If your business is located in an earthquake-prone area, you'll need a special Earthquake Insurance Policy or a Commercial Property Earthquake Endorsement.


Under the Terrorism Risk Insurance Act of 2002, only businesses that purchase optional terrorism coverage are covered for losses arising from terrorist acts.

Business Interruption Coverage
This type of coverage can be vital to the survival of your business if it’s been damaged by a disaster. Business Interruption Insurance is typically included in a business package policy and compensates you for lost income if your company has to vacate the premises due to disaster-related damage covered under your policy. The revenue you would have earned had the disaster not occurred is also covered. The policy also covers operating expenses, such as electricity, that continue even thought business activities have halted.  

Since it can take more time than anticipated to get your business back on track after a disaster, make sure the policy limits are sufficient to cover your company for more than just a few days. It generally takes 48 hours before business interruption coverage kicks in.

Extra Expense Coverage

Some businesses, especially those that provide an essential service to communities, may want to consider adding Extra Expense Insurance to its business policy. Extra expense insurance is designed to reimburse your company for reasonable costs incurred while normal business operations are disrupted. One example of a reasonable cost is having to set up a temporary location while the damaged location is being repaired to avoid or minimize a complete shutdown.

Disaster-Proof Your Business
Businesses that recover quickly from disaster also plan in advance. This involves not only purchasing the right insurance, but also developing and maintaining an adequate recovery plan. 

OFB-EZ (Open for Business-EZ) by IBHS is a free business continuity tool designed to help small businesses focus on planning so they can quickly re-open and resume operations following a disaster. Any business owner can create an easy-to-use recovery plan tailored to the individual business.

Some information provided by Insurance Information Institute and Insurance Institute for Business & Home Safety

Business Owners and Disasters