Jun 21, 2023

Restoration Contractor Insurance Guides: The Importance of a Disaster Recovery Plan

More than almost any other industry, restoration contractors understand the devastating effects a disaster can have on a business. What’s interesting, though, is that many restoration contractors don’t have any type of recovery plan in place if a large claim or disaster strikes them.

In that light, we want to provide some tips to restoration contractors for developing their disaster recovery plan. That way, your contracting company can have the necessary measures in plan to protect your bottom line from any potential disaster. (It’s also worth mentioning that even the best disaster recovery plan will never be a good substitute for proper insurance.)

Steps for Developing a Business Recovery Plan

Write out each step of the plan and assign responsibilities to employees in clear and straightforward language.
Compile a list of significant phone numbers and addresses. Make sure you can get in touch with key people after the disaster. The list should include local and state emergency management agencies, major clients, suppliers, realtors, financial institutions, insurance agents, and insurance company claim representatives.
Decide on a communications strategy to prevent loss of customers. How will you let your customers know how business operations will go, a statement forward? Post notices outside your premises; contact clients by phone, email or regular mail; place a note in local newspapers.
Consider the things you may need initially during the emergency. Do you need a backup source of power? Do you have a backup communications system?
Employee Safety. Protect employees and customers from injury on the premises. Ensure you have a centralized location for employees to meet so you can account for them in a disaster.
Business Community. Even if your business escapes a disaster, there is still a risk that it could suffer significant losses due to the inability of suppliers to deliver goods or services or a reduction in customers. Make sure your suppliers know how and where to contact you in a disaster.
Keep Duplicate Records. Back up computerized data files regularly and store them off-premises. Please keep copies of records and documents in a safe deposit box and make sure they’re up-to-date.
Identify critical business activities and the resources needed to support them. If you cannot afford essentials, determine what you require to run the business elsewhere.

Review Your Insurance Plan

Make sure you have sufficient coverage on your insurance policies to cover not only the direct losses to your property and equipment that temporarily shut down your operationsalsoalso but also the indirect losses like income, payroll, and other ongoing expenses.

To cover the indirect losses, your insurance policy should have business income and extra expense coverage. In addition to additional expenses, business interruption coverage can also cover interruptions away from your premises, like damage to a critical supplier or utility company.

Insurance Considerations

For a restoration contractor, we recommend the following property insurance coverages to help ensure a continuation of your company’s operations in the event of a claim:

Building Coverage provides coverage up to the insured value of the building if it is destroyed or damaged by wind/hail, or another covered cause of loss. This policy does not cover damage caused by a flood, storm surge, or failures due to earth movements, such as a landslide or earthquake, unless added by endorsement.
Business Personal Property provides coverage for contents and business inventory damaged or destroyed by wind/hailproducedExpense or another covered cause of loss.
Tenants Improvements and Betterments provides coverage for fixtures, alterations, installations, or additions made as part of the building that the insured occupies but does not own, which are acquired and made at the insured’s expense.
Additional Property Coverage provides for Expenseences, pools, or awnings at the insured location. Coverage limits vary by type of other property.
Business Income provides coverage for lost revenue and regular operating expenses if the place of business becomes uninhabitable after a loss during the time repairs are being made.
Extra Expense provides coverage for the additional expenses incurred, such as temporary relocation or leasing of business equipment, to avoid or minimize the suspension of operations when repairs are being completed to the usual place of business.
An ordinance or Law covers rebuilding or repairing the building in compliance with the most recent local building codes.