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Review Your Insurance CoverageReview Your Insurance Coverage

Overview

While proactive planning is your first line of defense in disaster protection, your insurance coverage may be your strongest armor. Some State laws prohibit consumers from purchasing, or altering, coverage when a known event is already on the way. Evaluate your current coverage and make needed changes as soon as possible.

Review your policy until you understand what you already have. Jot down questions as they occur to you.

  • If you occupy a leased facility, does the agreement specify who will make the determination regarding possible closure for repairs?
  • If you own your building,would you receive insurance claim disbursements, or would they be processed through a mortgage company?

Check all lease and purchase agreements for provisions that relate to disaster situations

  • Does your policy provide sufficient coverage for today's replacement costs for lost contents, or will depreciation formulas leave you short?
  • Does it include supplies, equipment and furnishings?
  • Are some items subject to standard maximums, or do you need special coverage for computers, related software and other items you may own?
  • Is leased equipment covered, or will you find yourself making periodic payments on equipment you no longer have?

Don't assume your fire and extended damage policy will protect you from all perils. Whether you own your own building, or lease your facility, you need to know what physical damage coverage is provided. Some policies do not cover wind, hurricane or flood damage.

  • Could you afford to do without income for an extended period of time?
  • How long could your business survive if you could not operate from your current location?
  • Could you continue your practice if you had a catastrophic loss of computer records, files, X-ray images or client files?

Business interruption insurance is one type of coverage that small-business owners often overlook. Coverage offsets income lost when you are unable to operate from an insured location because of disaster related damage. Compensation is calculated based on your financial history—so be prepared to provide documentation to back up your claim. Most policies exclude the first 48–72 hours. Insurers assume most business owners can absorb that much loss before they face serious risk.

Business interruption insurance also may pay for expenses that continue whether or not you are open for business—such as utility or telephone service—or provide you with funds for expenses related to doing business from a temporary location. It is added to your property insurance policy or written into a package plan. A word of caution—it will only protect you for perils that are named in your primary policy.

Your policy also may exclude protection against actions taken by civil authorities. Civil action may include being forced to evacuate; the power company cutting off service to a wide area to effect repairs; or the police closing roads leading to your location.

You can request an endorsement that will meet the needs specific to your practice. If your office is located on a barrier island, you are at higher risk than if it is on a busy highway that will be among the first to be cleared of debris. Weigh your risks against the cost of additional coverage.

Calculate Income Loss to determine the amount of business interruption coverage you should carry.

Extra Expense coverage offers another layer of protection that reimburses you for expenses that you may incur, over and above your regular operating costs, to stay in operation. If your office is intact after a disaster, but central power lines are down, this coverage might pay to bring in a generator that would allow you to continue operating. Generally, insurers will pay extra expense benefits only if those costs will be lower than paying for lost business.

Consider all options and discuss these possibilities with your insurance agent in advance.

  • Is there suitable office space within your budget that you could move into temporarily?
  • Have you negotiated a reciprocal agreement with another professional who might share space?
  • Could you afford to move undamaged equipment or lease items temporarily? What would it cost to notify patients of a change in location?
  • Would staff be able to report to the new site?

Some insurance companies will negotiate repairs directly on your behalf. Others will allow you to hire someone, but they will control disbursements. Make certain you know what your carrier’s regulations and procedures are before you incur expenses you may not be able to recoup.

Liability

Some kinds of storms are man-made, not natural. Your basic policy should provide coverage if a client trips on your front steps or is hurt on an open file cabinet. You probably carry protection for anything you, or an employee, may or may not do that puts a client at risk for bodily injury or other harm.

What if you are working under less than perfect conditions during or after a storm event?

Ask your agent if your current coverage will provide protection for contractors and employees who are performing duties outside their job descriptions.

Deductibles/Additional Expense

Floridians submitted 525,726 claims for hurricane related damage in 2004. Policyholders received more than $22 million in covered benefits, but they also paid $54 million in deductibles.

Even if you have secured business interruption insurance to offset lost profits, remember that such coverage is subject to a delay of 48 to 72 hours or more.

In the aftermath of a disaster, you may incur incidental expenses for such things as:

  • Batteries
  • Ice
  • Increased telephone toll
  • Temporary repair supplies
  • Bottled water
  • Food and beverages for clean-up volunteers
  • Fuel for generators

Do you have sufficient resources to cover additional costs and insurance shortfalls?

Thank you to the Florida Dental Association and Florida Dental Health Foundation for providing significant contributions to this content, which were funded in part by the American Dental Association Foundation.