Across the U.S., severe weather is on the rise. As winter draws to a close, Mother Nature will now phase into its next cycle: spring storm season. Without insurance, damage from spring storm season will hit small-business owners the hardest. 

Nationwide's annual Small Business Indicator survey revealed that a majority (68 percent) of small-business owners don't have a written disaster recovery plan — even though about half (49 percent) said it would take their business at least three months to recover from a natural disaster.

The survey was conducted by Harris Poll on behalf of Nationwide from June 10-23 among 502 U.S. small-business owners with fewer than 300 employees. The survey found that: 

  • 71 percent of small-business owners don't have business interruption insurance, which can be vital to survival since an estimated 25 percent of businesses never reopen following a major disaster
  • 21 percent of small-business owners without a written disaster plan said they don't have one because it's not a high priority for them
  • 22 percent of small-business owners have already been impacted by a natural disaster

PropertyCasualty360.com asked Mark Anderson, a Nationwide catastrophe expert with 40 years of on-the-ground catastrophe experience, who reported on Nationwide's survey last year, what small-business owners should do to prepare. 

Keep reading to see what advice Anderson offered for small businesses.

Disaster recovery plans are an essential preparation tool for small-business owners, especially as severe weather is on the rise in the U.S. (Source: Shutterstock)

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What are some specialty offerings that help independent agents customize products for clients who want business protection from disasters?

Most policyholders do not understand that business interruption does not apply if there was no direct physical loss to their covered property. For instance, if a major storm impacts an area and power is out for an extended period of time and there is no direct physical loss to the policyholder's business, there is no coverage for the period of time the business is closed due to the interruption of power. The agent and policyholder should know that there are companies that offer coverage for these types of situations.

  • Utility services – time element, which is an endorsement that covers losses for an event in which winds break down a power line or a water main is broken, including loss of income and expenses, up to a predetermined time limit or until the power or water service is restored
  • Utility services – direct damage, which is an endorsement that's an extension of property insurance, providing protection against damage to property resulting from an interruption of any of the utility services named in the policy as a result of a covered cause, such as a windstorm
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Why does this information serve as great tools for independent agents to use when talking to clients about business interruption and other forms of insurance beyond basic property insurance?

Most small-business owners are not well prepared for natural catastrophes. A majority (68 percent) of small-business owners don't have a written disaster recovery plan — even though nearly half of those surveyed said it would take their business at least three months to recover from a natural disaster.

Of the small-business owners that indicated they did not have a disaster recovery plan for their business, 68 percent also indicated they do have a family evacuation plan at home. If a business owner feels that a disaster plan is important enough for their family and the protection of their family, they should have that same concern for the safety and health and well-being of their employees, as those employees depend on that business to support their families.

Disaster can strike at any moment, but a little preparation can go a long way to keep your small-business up and running when it does.

For tips on creating a disaster recovery plan, check out the Insurance Institute for Business & Home Safety or Nationwide's Business Interruption Insurance page.

Mark Anderson is associate vice president of commercial lines property technical claims at Columbus, Ohio-based Nationwide.

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Denny Jacob

Denny Jacob is an associate editor for NU PropertyCasualty360. Contact him at [email protected].

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