100th Anniversary of Triangle Shirtwaist Fire a Reminder That Businesses Should Have a Disaster Plan In Place

Proper Risk Management Includes Getting the Right Insurance Coverage, Says I.I.I.

March 25, 2011

INSURANCE INFORMATION INSTITUTE
New York Press Office: (212) 346-5500; media@iii.org

NEW YORK, March 25, 2011 — The tragic Triangle Shirtwaist Fire, which occurred a century ago today, is a reminder to all businesses of the need to be prepared for a disaster. In addition to typical risks such as fire, there are a host of other risks that are unique to each particular type of business. So it is essential that business owners have a disaster plan in place, which includes buying the right type and amount of insurance. Business owners should also update their policies annually to include improvements, major purchases and increased rebuilding costs, according to the Insurance Information Institute (I.I.I.).

Do You Have a Disaster Plan In Place?

No matter how small or large a business, a business impact analysis should be developed to identify what an operation must do to protect itself in the face of a disaster. Large corporations often hire risk managers to handle this task and some companies hire consultants with expertise in disaster planning and recovery to assist them with their plans. But small businesses often have to be their own risk managers. 

 

Steps for setting up an effective disaster plan for your business:

Set up an emergency response plan and train employees how to carry it out. Make sure employees know whom to notify about the disaster and what measures to take to preserve life and limit property losses. 

• Write out each step of the plan and assign responsibilities to employees in clear and simple language. Practice the procedures set out in the emergency response plan with regular, scheduled drills.
• Compile a list of important 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, contractors, suppliers, realtors, financial institutions, insurance agents and insurance company claim representatives. 
• Decide on a communications strategy to prevent loss of customers. Post notices outside your premises; contact clients by phone, email or regular mail; place a notice in local newspapers.
• Consider the things you may need during the emergency. Do you have a back-up source of power? A back-up communications system?
• Human resources. Protect employees and customers from injury on the premises. Consider the possible impact a disaster will have on your employees’ ability to return to work and how customers can return to your shop or receive goods or services.
• Physical resources. Inspect the physical plant(s) and assess the impact a disaster would have on the facilities. Make sure your plans conform to local building code requirements. 
• Business community. Even if your business escapes a disaster, there is still a risk of suffering significant losses due to the inability of suppliers to deliver goods or services or a reduction in customers. Businesses should communicate with their suppliers and markets (especially if they are selling to a business as a supplier) about their disaster preparedness and recovery plans, so that everyone is prepared.
• Protect your building. If you own the structure that houses your business, integrate disaster protection for the building as well as the contents into your plan. Consider the financial impact if your business shuts down as a result of a disaster. What would be the impact for a day, a week or an entire revenue period?

• Keep duplicate records. Back up computerized data files regularly and store them off-premises. Keep copies of important records and documents in a safe deposit box and make sure they are up-to-date.
• Identify critical business activities and the resources needed to support them. If you cannot afford to shut down your operations, even temporarily, determine what you will require to run the business at another location. 
• Find alternative facilities, equipment and supplies, and locate qualified contractors. Consider a reciprocity agreement with another business. Try to get an advance commitment from at least one contractor to respond to your needs.
• Protect computer systems and data. There are many data storage and cloud computing firms that offer offsite backups of computer data.
  

Review Your Insurance Plan

Make sure you have sufficient coverage to pay for the indirect costs of the disaster, such as the disruption to your business, as well as the cost of repair and/or rebuilding. Most standard business policies do not cover flood or earthquake damage so you may need to buy separate insurance for these perils. Be sure you understand your policy deductibles and limits. New additions or improvements to your facilities should always be reflected in your policy. This includes construction changes to a property and adding new equipment.

 

For a business, the costs of a disaster can extend beyond the physical damage to the premises, equipment, furniture and other business property. The potential loss of income while the premises are unusable should also be considered. 

 

“One of the biggest mistakes business owners make is that they don't buy the right type of insurance and often have gaps in their coverage,” said Loretta Worters, vice president, I.I.I. “Business owners should contact their insurance agent or company representative annually to make sure that their insurance is adequate.”

 

A Businessowners Policy (BOP) is recommended for most small businesses (usually 100 employees or less), as it is often the most affordable way to obtain broad coverage. BOPs are “off the shelf” policies combining many of the basic coverages needed by a typical small business into a standard package, at a premium that is generally less than would be required to purchase these coverages separately. As it combines both property and liability insurance, a BOP will cover your business in the event of property damage, suspended operations, lawsuits resulting from bodily injury or property damage to others, etc.

 

BOPs do NOT cover professional liability, auto insurance, workers compensation or health and disability insurance. You will need separate insurance policies to cover professional services, vehicles and your employees.

 

For medium-sized and larger businesses, there are more comprehensive commercial policies. To properly insure your business, the I.I.I. suggests that you ask your agent or company representative these important questions to determine if you have the right type of policy and amount of coverage:

 

1. Do I have enough insurance to rebuild my business property and replace all of my merchandise and possessions?

A Building and Personal Property coverage (BPP) policy is commonly used to cover any combination of the following three broad categories: the building, your business personal property and the personal property of others. Usually the covered building is owned by the insured. However, a lessee might insure a leased building when required to do so by the terms of the lease.

 

Your BPP coverage includes seven specific categories:

1. Furniture and fixtures
2. Machinery and equipment
3. Stock (i.e., merchandise held in storage, including raw materials, work in-progress and finished goods)
4. All other personal property owned by you and used in your business
5. Labor, materials and services furnished or arranged by you on the personal property of others
6. If a tenant, the improvements or betterments you have made
7. Leased personal property that you have a contractual responsibility to insure

It is vital that the value of your property be accurately reported and updated annually to reflect inflation and other increases in cost.

 

2. Do I have enough insurance to protect the personal property of my employees?

In order to protect the property of your employees, you will need to add Personal Effects and Property of Others coverage to your policy. This coverage permits the insured to extend up to $2,500 worth of its business personal property coverage to personal effects of the insured and its officers, partners or employees and personal property of others in the insured’s care, custody or control. The personal effects coverage does not include theft, even when theft is a covered cause of loss under the policy.

 

If the $2,500 limit is inadequate, a higher limit can be purchased.

 

3. Do I have enough insurance to keep my business open?

A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick resumption of business after a disaster is essential, so business interruption insurance is crucial.

 

“Make sure the policy limits are sufficient to cover your company for more than a few days,” said Worters. “After a major disaster, it can take more time than many people anticipate to get a business back on track. There is generally a 48-hour waiting period before business interruption coverage kicks in,” she added. “Too many business owners fail to think about how they would manage if a fire or other disaster damaged their business premises so that it was temporarily unusable.”

 

The price of the policy is related to the risk of a fire or other disaster damaging your premises. All other things being equal, the price would probably be higher for a restaurant than a real estate agency, for example, because of the greater risk of fire. Also a real estate agency can more easily operate out of another location.

 

There are typically four types of business interruption insurance. You can purchase any one of these or any combination of them that would make sense for your business:

 

• Business income coverage: Compensates you for lost income if your company has to vacate its premises due to disaster related damage that is covered under your property insurance policy. Business income insurance covers the profits you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, such as electricity, that continue even though business activities have come to a temporary halt.
  
  Review your annual financial records with your accountant to determine your annual net profit (total revenue minus total expenses). You should also have an approximate idea of how much profit you make (and would therefore lose) during a typical year. Purchase enough business income coverage to protect at least this amount of revenue.)

 

• Extra income coverage: Reimburses your company for a reasonable sum of money that it spends, over and above normal operating expenses, to avoid having to shut down during the restoration period.
  
  In order to calculate how much extra expense coverage you will need, an appraisal of your office building or any other operating locations should be made as well as a detailed inventory, not only of your product stock but also of your existing office equipment.

 

• Contingent business interruption insurance: Protects a business owner’s earnings following physical loss or damage to the property of the insured’s suppliers or customers (as opposed to the business owner’s own property). Companies today are heavily dependent on raw materials from key suppliers to make the products they sell. What happens if the supplier suffers a loss and cannot continue to deliver the product?
  
  Make sure to determine how much revenue would be lost if you were unable to receive your product from your main supplier or if your main customers were unable to buy from you.

 

• Ordinance or Law: Provides coverage to rebuild or repair any buildings occupied by the business in compliance with the most recent local building codes.

“Most business owners are complacent about natural disasters until it affects their business,” said Worters. “Too often it’s only once the owner has gone through a disaster that he or she starts considering a disaster plan, including purchasing the proper insurance.”

 

Business owners can download a copy of the Insurance Institute for Business & Home Safety’s Open for Business: A Disaster Planning Toolkit for the Small Business Owner or find information at the Small Business Administration.

 

The I.I.I. has posted a special section dedicated to the Triangle Fire Centennial. Facts and Statistics on Fire Losses as well as Workplace Safety and Workers Compensation are also available.

 

 

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THE I.I.I. IS A NONPROFIT, COMMUNICATIONS ORGANIZATION SUPPORTED BY THE INSURANCE INDUSTRY.

Insurance Information Institute, 110 William Street, New York, NY 10038, (212) 346-5500

Is Your Home Insured for Flood Loss? Policies Take 30 Days to Go Into Effect So Act Now Before Waters Rise, Says I.I.I.

Melting Snow and Heavy Rains Are Forecast to Cause Extensive Flooding This Spring

March 10, 2011

I.I.I. Video:
Water and Flood Damage: What Is and Is Not Covered

INSURANCE INFORMATION INSTITUTE
New York Press Office: (212) 346-5500; media@iii.org

NEW YORK, March 10, 2011 — Fast melting snow, severe storms and heavy extended rainfall can all contribute to extensive flooding during the spring months, according to the Insurance Information Institute (I.I.I.), which is encouraging U.S. residents to learn about their risk during Flood Safety Awareness Week (March 14-18). 

 

Midwestern states that had record amounts of snowfall are particularly vulnerable to flooding from overwhelming rivers, lakes and streams. Homeowners and renters who reside near bodies of water should purchase a flood insurance policy if they haven’t already done so, warned the I.I.I.

 

“Floods are the nation’s leading natural disaster – anywhere it rains, it can flood,” said Loretta Worters, vice president with the I.I.I.

 

While the optional comprehensive portion of an auto insurance policy includes coverage for flood damage, it is excluded under standard homeowners and renters insurance policies.

 

Flood coverage for homeowners and renters is available in the form of a separate policy from the federal government’s National Flood Insurance Program (NFIP) and from a few private insurers. There is typically a 30-day waiting period—from date of purchase—before a new NFIP policy goes into effect, so it’s important to act now, before the waters rise. Consumers can get more information by visiting the NFIP’s FloodSmart website. The site includes numerous interactive resources (all of which are shareable), including:

• Cost of Flooding tool – estimates the cost of damage from various levels of flooding
• Flood Risk Scenarios
• Video Library – home and business owners who have experienced flooding
• One Step Flood Risk Profile tool – accessed from the home page, enables consumers to estimate their risk and flood insurance premiums and find agents who serve their communities
• FEMA’s Are You Ready for Flooding? widget
• Link to FEMA’s Flood Safety Awareness Week site – additional information about the dangers of flooding and how U.S. residents can protect themselves and their properties

Just a few inches of water from a flood can cause tens of thousands of dollars in damage. Over the past 10 years, the average flood claim has amounted to over $33,000, the NFIP reported.

 

The National Oceanic and Atmospheric Administration (NOAA) notes that a large swath of the U.S. is at risk of moderate to major flooding this spring, from northeastern Montana through western Wisconsin following the Mississippi River south to St. Louis. On February 24, the National Weather Service released an initial spring flood outlook for this high risk region and is expected to release a national spring flood outlook on March 17.

 

For the third consecutive year, forecasters predict moderate to major flooding along the Red River of the North, which forms the state line between eastern North Dakota and northwest Minnesota and includes the Souris River Basin and the Devils Lake and Stump Lake drainages in North Dakota. If the current forecast holds, the main stem Mississippi River is at risk for moderate to major flooding from its headwaters in St. Paul, Minnesota, all the way to St. Louis.

 

When it comes to floods and the damage they can do, many people are complacent. A 2010 I.I.I. poll found that 16 percent of Americans thought their homeowners policy covered damage from flooding during a hurricane. Moreover, the proportion of people in the South—among the areas most severely affected by hurricane related flooding—who thought homeowners insurance covers flooding from a hurricane was only10 percent higher, a mere 26 percent.

 

The NFIP provides coverage to its policyholders for up to $250,000 for the structure of a home and $100,000 for personal possessions. Private flood insurance is available for those who need additional insurance protection, known as excess coverage, over and above the basic policy or for people whose communities do not participate in the NFIP. Some insurers have introduced special policies for high-value properties; these policies may cover homes in non-coastal areas and/or provide enhancements to traditional flood coverage. 

 

The average cost of a flood policy for homeowners is $570 annually but can be as low as $129 a year in low risk areas. For renters in a moderate to low risk area, rates start from $49 annually for contents-only coverage.

 

“Your home is your most valuable asset and flood insurance is the best and most affordable way to protect that investment,” said Worters.

 

For a related video, go to Water and Flood Damage: What Is and Is Not Covered.

 

 

FEMA’s mission is to support our citizens and first responders to ensure that as a nation we work together to build, sustain, and improve our capability to prepare for, protect against, respond to, recover from, and mitigate all hazards. For more: FEMA.gov

Don’t Risk Being Underinsured: Five Insurance Mistakes To Avoid

Nearly Half of U.S. Homeowners Don’t Know Insurance Covers Rebuilding Costs, Not Sales Price of Their Home, Says I.I.I. Study

March 3, 2011

INSURANCE INFORMATION INSTITUTE

NEW YORK, March 3, 2011 — Too many Americans believe that the coverage limits of their homeowners insurance policy are linked to the market value of their home, according to the Insurance Information Institute.

 

In the I.I.I.’s 2011 Insurance Pulse Survey, conducted by the Opinion Research Corporation, nearly half (48 percent) of survey respondents came to that mistaken conclusion.

 

“The real estate value of a home, that is the price you can buy or sell it for, has absolutely nothing to with the amount of insurance needed to financially protect the homeowner in the event of a fire or other disaster,” said Jeanne M. Salvatore, senior vice president and consumer spokesperson for the I.I.I. “Reducing insurance coverage because the market value of a home has decreased can result in being dangerously underinsured.”

 

One out of three respondents to the Pulse Survey reported that they purchased less homeowners or auto insurance as a way to save money. A better strategy would be to take a higher deductible, which can substantially reduce insurance costs. Home and car owners can then put the savings into a purchasing the right amount and type of insurance for their specific needs, pointed out Salvatore.

 

Another way to save money is to comparison shop, something that seven out of 10 Pulse Survey respondents said they utilized as a strategy to save on both their home and auto insurance needs.

 

Following are the five biggest auto, home, flood and renters insurance mistakes consumers can make, with suggestions to avert those pitfalls while still saving money:

 

1. Insuring a home for its real estate value rather than for the cost of rebuilding. When real estate prices go down, some homeowners may think they can reduce the amount of insurance on their home. But insurance is designed to cover the cost of rebuilding, not the sales price of the home. You should make sure that you have enough coverage to completely rebuild your home and replace your belongings.

 

A better way to save: Raise your deductible. An increase from $500 to $1,000 could save up to 25 percent on your premium payments.

 

2. Selecting an insurance company by price alone. It is important to choose a company with competitive prices, but also one that is financially sound and provides good customer service.

 

A better way to save: Check the financial health of a company with independent rating agencies and ask friends and family for recommendations. You should select an insurance company that will respond to your needs and handle claims fairly and efficiently.

 

3. Dropping flood insurance. Damage from flooding is not covered under standard homeowners and renters insurance policies. Coverage is available from the National Flood Insurance Program (NFIP), as well as from some private insurance companies. Many homeowners are unaware they are at risk for flooding, but in fact 25 percent of all flood losses occur in low risk areas. Furthermore with the significant snow fall this winter, spring related flooding may be particularly severe, thus increasing the importance of purchasing flood insurance.

 

A better way to save: Before purchasing a home, check with the NFIP to determine whether the property is situated in a flood zone; if so, consider a less risky area. If you are already living in a designated flood zone, look at mitigation efforts that can reduce your risk of flood damage and consider purchasing flood insurance. Additional information on flood insurance can be found at www.FloodSmart.gov.

 

4. Only purchasing the legally required amount of liability for your car. In today’s litigious society, buying only the minimum amount of liability means you are likely to pay more out-of-pocket if you are sued—and those costs may be steep.

 

A better way to save: Consider dropping collision and/or comprehensive coverage on older cars worth less than $1,000. The insurance industry and consumer groups generally recommend a minimum of $100,000 of bodily injury protection per person and $300,000 per accident. 

 

5. Neglecting to buy renters insurance. A renters insurance policy covers your possessions and additional living expenses if you have to move out due to an insured disaster, such as a fire or hurricane. Equally important, it provides liability protection in the event someone is injured in your home and decides to sue.

 

A better way to save: Look into multi-policy discounts. Buying several policies with the same insurer, such as renters, auto and life will generally provide savings.

Keeping Teen Drivers Safe

The number of fatal car crashes involving teen drivers decreased by nearly a third over a five-year period between 2004 and 2008 according to U.S. officials. The number of teen deaths dropped dramatically from about 2,200 to 1,400. "Teen Driving Fatalities Drop Sharply in Last Five Years," MSNBC (Oct. 21, 2010).

The decrease is due to safer cars and tougher driver's license laws that limit when teens can drive according to the Centers For Disease Control (CDC).

Commentary

Traffic crashes are the leading cause of death for teenagers in the United States according to the National Highway Traffic Safety Administration (NHTSA).

Teenagers between the ages of 15 to 20 years old are especially vulnerable to death and injury on roadways because of their inexperience and immaturity. Behaviors that contribute to traffic crashes include: speed, drinking and driving, not wearing seat belts, distracted driving, drowsy driving and nighttime driving.

Parents should talk with their teens to encourage positive opinions, ideas and behaviors. Remember to be patient and clear when giving driving instructions and set a precedent for safe driving practices through example. Remind them to:

• Slow down and take their time. Speeding is considered a primary concern in all crashes including fatal crashes.
• Keep their attention on the road at all times. Activities such as text messaging, talking on a cell phone or watching a movie should never be participated in while operating a vehicle.
• Always wear their seat belt. Regular seat belt use is the single most effective way to protect drivers and passengers and reduce fatalities in motor vehicle crashes.
• Never drive under the influence of alcohol and/or drugs. Although alcohol consumption is illegal for young people it is a prevalent problem with young drivers.

(from www.chubbprotection.com/article.htm?id=3177)