Being prepared for an earthquake is a good investment if you are in a quake-prone area. At least one-fourth of all businesses that close because of a disaster never reopen, mostly because they are unprepared.
“Is Your Business Ready” questionnaires are a great place to start to help you determine how you might respond in case of a major earthquake (you’ll find the quiz below).
Next, start preparing a business continuity plan to ensure core functions and key personnel are identified and to ensure normal operations are resumed as quickly as possible. The Institute for Business and Home Safety offers some planning tools for free, and others are available from their members’ insurance companies for their clients.
Do the following to promote individual preparedness and help get your employees involved:
- Distribute information and offer training for all employees on individual and family preparedness.
- Create a list of phone contacts for all your staff, with an out-of-area contact.
- Maintain individual 72-hour “comfort kits” in the office.
Next, conduct a hazard assessment of your workplace. Take steps to reduce potential impacts, such as by fixing loose shelving, removing heavy items from top shelves, securing cabinets with breakables in them, and securing wall art and inventory to avoid damage to the products or injury to staff.
Develop and test an emergency evacuation procedure and create a shelter in a place at your business where you can house employees or customers if necessary. Make sure you have one for each of your business locations.
Develop a communication plan to implement following a quake. Make sure you have a list of key contacts – personnel, vendors and suppliers, etc. – and develop a media communication plan so you can reach your customers through the news media.
Take steps to protect vital records. There are many vendors who provide off-site storage of data. Ask your peers for recommendations or check with your independent insurance agent, who may have access to business recovery vendors.
Review insurance coverage on an annual basis to ensure you have adequate coverage to meet your risk level. Earthquake insurance is not covered under a standard business insurance policy. Similar to flood insurance, earthquake coverage usually must be purchased separately.
Earthquake insurance typically covers the cost of repairs to property damaged in a quake. Coverage is usually available for earthquake damage in the form of an endorsement to a business insurance policy. There may also be coverage for fire following a quake.
These losses could involve claims for business interruption, and additional living expenses as well. Cars and other vehicles are covered for earthquake damage under the comprehensive part of an auto insurance policy.
Small business owners should calculate the full sum it would take to repair or rebuild the business in the event of an earthquake. This covers a wide range of costs, from engineering requirements for rebuilding office space to inventory storage while repairs are being done to the building.
Coverage for other kinds of damage that may result from earthquakes, such as fire and water damage due to burst gas and water pipes, is provided by standard business insurance policies. Cars and other vehicles are covered for earthquake damage by comprehensive insurance, which also provides protection against flood and hurricane damage, as well as theft.
Earthquake insurance carries a deductible, generally in the form of a percentage rather than a dollar amount. Deductibles can range anywhere from 2% to 20% of the replacement value of the structure. This means that if it cost $100,000 to rebuild a business and there was a 2% deductible, the business owner would be responsible for the first $2,000.
In most cases, business owners can get higher deductibles to save money on earthquake premiums.
Premiums also differ widely by location, insurer and the type of structure that is covered. Generally, older buildings cost more to insure than new ones. Wood-frame structures normally benefit from lower rates than brick buildings because they tend to withstand quake stresses better.
Regions are graded on a scale of 1 to 5 for likelihood of quakes, and this may be reflected in insurance rates offered in those areas.
Take the Quiz: Is Your Business Ready?
Answer Yes, No or Unsure – your answers could determine how you handle a disaster.
- Are you concerned that your normal business operations might be interrupted by a natural or human-caused disaster?
- Have you determined what parts of your business need to be operational as soon as possible following a disaster, and planned how to resume those operations?
- Do you and your employees have a disaster-response plan in place to help assure your safety and to take care of yourselves until help can arrive?
- Could you communicate with your employees if a disaster happened during or after work hours?
- Can your building withstand the impact of a natural disaster, and are your contents and inventory sufficiently protected?
- Are your vital records protected from the harm that could be caused by a disaster?
- Are you prepared to stay open for business if your suppliers cannot deliver, your markets are inaccessible, or basic needs (e.g., water, sewer, electricity, transportation) are unavailable?
- Do you have plans to stay open for business even if you cannot stay in or reach your place of business?
- Have you worked with your community, public officials and other businesses to promote disaster preparedness and plan for community recovery?
- Have you consulted with an insurance professional to determine if your coverage is adequate to help you get back in business following a disaster?
Your score indicates how well-prepared you are for a disruption caused by a natural or human-caused disaster.
7-10 Yes answers: You are well on your way.
4-6 Yes answers: You have lots of work to do.
0-3 Yes answers: You should get started immediately.
Quiz source: The Insurance Institute for Business and Home Safety http://www.disastersafety.org/