The Best Policies

The coverage you need to bounce back

The right insurance is key to recuperating after a disaster. In most cases, that means your business needs adequate property, liability, and business income insurance, also called business interruption insurance.

Property insurance covers buildings, business equipment, and inventory damaged by fire, wind, or other "covered peril" specifically named in the policy. Most exclude damage caused by earthquakes or floods. Separate earthquake insurance may be available through your agent; to see if you qualify for the National Flood Insurance Program, visit

Entrepreneurs who own older buildings may want to add contingent liability coverage, which covers the cost of bringing damaged buildings up to current building codes.

Less familiar to many entrepreneurs is business income insurance. It does two things: replaces income lost while your business is closed and reimburses you for bills you run up while restoring your business. Replacement income is typically calculated as the amount of revenue lost minus the cost of goods. Covered expenses might include rent for a temporary office, premiums charged by suppliers to replace lost stock, or overtime pay for employees. The insurance kicks in only when property is damaged due to a covered peril. Most policies are limited by time, so many experts recommend getting a policy that remains in effect for one year after the date of the disaster. Manufacturing businesses may face dollar limits on payouts.

Many insurers bundle these three types of coverage in business owner's policies (BOPS), which can be less expensive than purchasing the policies separately. Costs of BOPS vary, but small businesses can expect to pay $2,500 to $5,000 a year, says Karlyn Carnahan, vice-president of commercial business at Fireman's Fund Insurance in Novato, Calif.

Your insurer may lower your premiums if you take part in disaster planning or human resources training. And let your agent know about any changes in your business, such as major purchases or expansion. You'll want to get every dollar your business deserves.

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