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Risk Management Bulletin


By February 1, 2008No Comments

If disaster strikes, how well you’re protected against the risks facing your business can make the difference between survival and extinction. Once you’ve identified the risks involved, you have three basic options: (1) Reduce or eliminate them (avoidance); (2) accept them (acceptance); or (3) limit the financial damage by assigning the risks to an insurance company (risk transfer — or insurance).

Unfortunately, risk management protection through insurance often fails to go beyond Commercial Liability and Property coverages.

For example, Key Person Life policies on one or more key executives will reimburse your business against potential financial losses from their death. Business Interruption coverage can help keep you up and running after a disaster by covering payroll expenses and protecting against the loss of suppliers and buyers.

You should also consider other types of business insurance to minimize the damage from a catastrophe. In deciding on the policies that best fit your needs, ask these questions:

  1. Are your coverage limits and deductibles appropriate?
  2. For what types of disasters (perils) are you insured? Which perils are specifically excluded?
  3. Does your insurance provide adequate protection to senior management against litigation from inadequate business continuity planning?
  4. Does your coverage factor in inflation, improvements, and building code changes?
  5. Is your coverage for “replacement cost” or “actual value” (cost less depreciation)?
  6. Will your Business Interruption insurance pay loss of income and payroll expenses?
  7. Is your documentation (serial numbers, dates of purchase, cost, receipts, photographs, etc.) current and detailed enough for your insurance company?
  8. Do you have the originals of all policies secured in a fireproof cabinet, or off site, with copies readily available?
  9. Are you covered for loss of power or other critical services?
  10. What about coverage for a denial of access order issued by civil authorities?
  11. Does your insurance cover losses from a disruption of transportation services?
  12. If the Disaster Management Team makes a “disaster declaration,” will your insurance cover the costs charged by your alternate site vendor? What about the extra personnel and other costs associated with activating and operating the alternate site?
  13. Do you carry enough Life insurance on key executives?
  14. If you implement an effective Business Continuation Plan will your insurance premiums go down? Have you reviewed your coverage with your professional insurance advisor within the past year?

The time to take action is now — before it’s too late. We’d be happy to help.