RWhen Disaster Strikes: Business Income Insurance to the Rescue

Risk ManagerRisk Manager

continued on page four

Volume 22, No. 4

Recent natural disasters have prompted business owners to evalu-ate their disaster preparedness, risk management, and insurance pro-grams. If a natural disaster were to force you to temporarily suspend business operations, how would you meet your payroll obligations or cover other fixed costs without a continuing income stream from your business?

Business income insurance, also called business interruption coverage, is designed to replace the income your business would gener-ate under normal circumstances in the event of a disaster or other cov-ered loss. It can help your company get back on its feet by providing funds to help cover critical expenses and lost profit until the business is up and running again. Without business income coverage, some companies are never able to reopen after disaster strikes.

Policy Limits

Most policies restrict coverage to business interruptions that cause direct physical damage to, or the loss of, property at the insured site.

Special coverage is needed for boiler and machinery breakdowns and off-site power failures.

Besides covering significant fixed costs during a shutdown, you may also require funds to help accelerate your recovery after a loss. For in- stance, you may need to hire tem-porary help, rent or purchase new equipment, or rent or move into a substitute facility. These are referred to as “extra expens-es.” Does business income insurance cover extra expens-es? That depends on the policy. Some policies cover these costs, while oth-ers do not. You have the option of purchasing extra expense coverage separately.

To determine the appropriate amount of coverage, esti-mate the maximum probability of time

that operations could be suspended by a covered loss, and assess the level of lost profit and continuing ex-penses that would accrue during the interruption. If keeping your business operating after a loss is essential, determine the cost beyond normal ex-penses (cost of shipping equipment, overtime pay for construction work-ers, cost of moving and temporarily operating elsewhere, etc.) to continue during reconstruction.

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Phone (319) 233-8459 • 611 Ansborough Avenue • P.O. Box 748 • Waterloo, Iowa 50704

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Did You Know?

A Risk Management Solution for Small Business Owners

When you consider all the things that could go wrong with a business, it’s no surprise that small business owners are often described as risk tak-ers. However, there are two risk expo-sures that business owners cannot af-ford to overlook: property loss due to perils such as fire, theft, wind, or water damage, and liability loss for injuries sustained by individuals while on busi-ness premises and/or during operation of the business. Although self-insuring was once an option, in today’s litigious society, it is not cost-effective or a solution, particularly for potentially catastrophic losses. A business owners policy (BOP) can play a crucial role in risk management.

A BOP bundles prearranged property and liability coverage in one package by providing property coverage for a build-ing and its contents, coverage for loss of business income after an accident, and liability coverage for physical in-jury or physical damage caused by an employee or an on-premises risk, operation, or product. Note that health insurance, workers’ compensation, and business automobile coverage are typically not included in the standard BOP.

The primary advantages of a BOP are ease of handling, streamlined rat-ing procedures, and a reduced need for detailed risk management decisions. Typically, a BOP is less expensive than purchasing several policies separately.

Is a BOP Right for My Business?

Generally, specific criteria must be met in order to qualify for this type of policy. First, your business should be considered a “good” risk so that premi-ums can be priced more affordably than individual policies. For instance, a small neighborhood bookstore selling books on gardening may have an easier time obtaining a BOP than a company that is in the building demolition business, in which serious accidents may be more likely to occur. Second, your business should have “ordinary” insurance needs without the potential for unusual expo-sure to loss. Again, a demolition compa-ny would have more unusual exposure to loss. A standard BOP that does not adequately meet the needs of a particu-lar business may be customized to meet those specific needs, which often makes a BOP an appropriate choice for small businesses.

While every business is unique, many businesses are exposed to similar types of risk. If the risk exposures of your business are fairly common, you may want to explore the benefits of a BOP. Having most risks covered under one policy can prove to be a cost- effective risk management tool. For more information on BOPs, give us a call. One of our qualified insurance professionals will be happy to help you determine if a BOP is right for your business.

Data Collection ConcernsAccording to a recent survey by

Data Privacy Management (DPM), 74% of U.S. Internet users are more concerned about their privacy online than a year ago, and users more frequently cite business data collection, rather than government surveillance programs as the reason for their concerns. Only 55% of re-spondents are regularly willing to share their personal information online. As online trust declines, the potential impact on business is high, with 89% of consumers saying they avoided doing busi-ness with companies they do not believe protect their privacy online.

Dream RelocationsThe U.S., followed closely by

Europe, was the overall No. 1 answer when Cartus Corporation asked several hundred relocation and human resource professionals where they would most want to accept a job transfer. The survey further found that the most import- ant factors before accepting a new job assignment were these: 38%, family’s happiness while on assign- ment; 22%, pay raise/new responsi-bilities; 22%, career advancement; 13%, location; and 5%, length of assignment.

Productivity Peaks on TuesdayThirty-three percent of human

resource managers surveyed ranked Tuesday as the most productive day of the week, according to a recent survey conducted by Accountemps, the world’s largest specialized staff-ing service for temporary account-ing, finance, and bookkeeping. The survey further found that Thursday and Friday were the least produc-tive days at 5% and 6%, respectively. Tuesday has been the most pro-ductive day in similar productivity surveys since 2001.

For YourInformation

TThere may not be anything unusual about your day today, but you never know what the future may bring. Over-night, a theft, natural disaster, fire, or lawsuit could affect your business dra-matically. Therefore, risk management deserves a top ranking on your list of priorities.

What Is Risk Management?

Risk management involves an aware-ness of your business’s exposure to dan-ger, hazard, crime, or any other uncer-tainty, and doing what you need to do to protect your business from those risks. It also means having the right kind and appropriate amount of insurance cover-age to maximize opportunities and minimize adverse effects. Risk manage-ment is an ongoing process that could mean the difference between overcoming a disaster and having to succumb to it, and close your company. While risk can’t be eliminated entirely, it may be possible to reduce its negative effects on your business operations.

Risk Management Basics

1. List Your Assets

Note everything you need to protect in your business, including your build-ing, machinery and other equipment, vehicles, computer data, and cash.

2. Identify Your Risks

What might expose your business to loss? It could be anything from irrespon-sible employees to mechanical problems, such as faulty machinery. Don’t forget about universal risks, including fire, theft, and natural disasters.

3. Focus on Loss Prevention

Loss prevention is the key to risk management. This could mean improv-ing workplace safety, training work-ers on how to use equipment properly, creating tougher hiring procedures, and rewarding employees for their dedication,

to improve morale. Regardless of what measures you adopt to prevent loss, al-ways have an emergency plan in place to curb your losses.

4. Spend Insurance Money Strategically

Put your premium dollars where they will do the most for your busi-ness. For example, you may want to increase deductibles wherever possible and put the money saved toward an umbrella policy to protect against a liability loss of catastrophic proportions.

Evaluate the Big Picture Regularly

Circumstances change over time. A regular review of your overall risk management program allows you to recognize new risks, develop loss prevention solutions, and update your insurance coverage to better address your needs.

Your ability to think like a risk manager is necessary for the survival of your business. We encourage you to take on this role, but we don’t ex-pect you to do it alone. We’re here to help you with your risk management program. Please stop in or call us for assistance.

Enhanced Tool to Track Energy

The U.S. Environmental Protec-tion Agency (EPA) has recently released an upgrade to its online energy management and tracking tool, Energy Star Portfolio Manag-er (www.energystar.gov). The tool can help businesses make their commercial properties at least 20% more efficient by 2020. The upgraded Portfolio Manager has enhanced data sharing capabili-ties and reporting, and now can be used to manage buildings from design to occupancy. The tool has become the standard platform across the nation for benchmark-ing energy use, and can help busi-nesses be recognized by the EPA for their energy-saving efforts.

BBB OnlineThe BBB Military Line at

www.BBB.org has provided free resources to our military com-munities in the areas of financial literacy and consumer protection through the efforts of 113 BBBs across the U.S. The five main components of the program are education, outreach, information, data collection, and complaint and dispute resolution.

Small Business Innovation Research Program

The EPA is one of 11 Federal agencies participating in the Small Business Innovative Research (SBIR) program (www.epa.gov/ncer/sbir). SBIR provides incentive funding to small businesses for developing their advanced concepts into com- mercial products that address en-vironmental problems. It awards $2 million to small businesses for sustainable technology development. The next EPA SBIR Phase I solici- tation is scheduled to open in spring of 2014.

Taking On a Risk Management Role

Copyright © 2014 Liberty Publishing, Inc. All rights reserved. The content of this newsletter is taken from sources that are believed to be reliable. However, this

newsletter is not intended as a substitute for legal, financial, or professional counsel.

Risk Manager

Be Prepared

It is important to realize that busi-ness income coverage is limited to the period of time it takes to restore dam-aged property. Since time will be crucial right after a disaster, you may want to take some steps in advance that will enable you to take action immediately. Here are a few tips to help you prepare:

• Create an action plan noting every-thing that must be done to resume operations on a full- or part-time basis after a disaster.

• Identify all machinery and equip-ment necessary for business opera- tions and develop a plan to provide backup coverage, if needed.

• Locate alternative sources for the materials and supplies you rely on, in case you are cut off from your major supplier. If a supplier is responsible for a sizable portion of your revenue, consider contingent business income coverage for pro-tection should the supplier sustain a catastrophic property loss.

When Disaster Strikes: Business Income Insurance to the Rescuecontinued from page one

There are many details to be con-cerned about when it comes to help-ing your business survive in a crisis. Business income insurance can help provide a key source of funds during a temporary shutdown. For more infor-mation, and to address your specific circumstances, give us a call. We would be glad to discuss your coverage op-tions with you.

AReducing the Effects of Noise in the Workplace

According to the National Institute for Occupational Safety and Health (NIOSH, 2013), over 22 million workers in the U.S. are exposed to hazardous noise on the job, and an additional nine million are at risk for hearing loss from other agents and solvents. An esti-mated $242 million is spent annually on workers’ compensation for hearing loss disability. Extended noise exposure can cause temporary ringing in the ears or other temporary changes in hear-ing. The ears may also feel stuffed up. Short-term problems usually subside within a few minutes or hours after the noise ceases. However, repeated expo-sures to loud noise can lead to perma-nent, incurable hearing loss.

Certain occupations, such as agricul-ture, mining, construction, manufactur-ing, transportation, and the military, are prone to higher noise levels and therefore pose a greater risk of hear-ing loss to workers. Industry-specific studies reveal that 49% of workers in the mining industry are likely to experi-ence hearing impairment by age 50, compared to around 9% of the general

population. This rises to 70% for min-ing workers at age 60. Approximately 48% of plumbers and 44% of carpenters report a perceived hearing loss. The

studies also reveal that noise-induced hearing loss is the second most self-reported occupational illness.

An Ounce of Prevention

While hearing loss is permanent, it can be prevented. Business owners can take several steps to minimize hazardous

noise on the job, such as installing a muffler or an acoustic barrier. In addition, employers can provide workers with protective devices, such as earmuffs or earplugs, and teach proper usage.

The gradual effect on hearing may go unnoticed, especially if at-risk em-ployees are not aware of the potential consequences. To determine the extent of noise pollution, a business can em-ploy a noise evaluation service to mea-sure sound levels in the workplace. In this way, employers may become aware of which employees are most at risk for hearing loss. With regular hearing tests, signs of hearing loss can be detected early and addressed before severe dam-age results. Preventive measures can reduce workers’ compensation claims, avoid higher business insurance costs, and prevent Occupational Safety and Health Administration (OSHA) viola-tions and fines.

For more information on hearing loss prevention programs in the work-place, visit www.cdc.gov.

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Elliott-Hartman AgencyInsurance