Fire or flood damage can interrupt your business for weeks or even months. If you intend on re-opening the business, you must still meet your obligations while you complete the repairs required. These may include bank loan payments, utilities, payroll, rent, and many of the other costs of owning and operating a business.
Business property and interruption insurance can help cover the costs to repair the damage, replace equipment, contents, and inventory, and even replace lost business income in order to keep your business afloat after suffering a physical loss or damage. Even with insurance, many businesses do not survive a disaster like a fire or flood. Taking the right steps after a suffering a loss can help your business recoup costs and re-open on the right foot.
#1 Contact Your Insurance Company
After the flames subside or water has been removed, call your insurance company and report your loss immediately. Make this call quickly to avoid delays in compensation or missing any deadlines, which may be outlined in your insurance policy. Your insurance company will send an adjuster to assess the damage to the building, inventory, contents, equipment, and other losses. This adjuster may be a direct employee of the insurance company, or a third party contracted to act on their behalf.
You may want to begin researching information about structural damage and how the insurance claims process works with regard to repairs and rebuilds. In addition to repairing and replacing the building materials and structural elements directly damaged by water or flames, extensive restoration work may be required to remove smoke particles and water damage from indirectly effected parts of the premises, inventory, equipment, or contents.
#2 Document the Damage
Your next step should be to document the full extent of the damage as best you can. Documentation can feel overwhelming in all the chaos left in the wake of a fire or flood, but it an important step when it comes time to prove your claim. Here are a few pointers to help manage the process of completing a thorough review of the damage:
- Start small and break up the task into smaller areas. Begin at the front door and work your way through. Many make the mistake of starting with all the big items, but that can quickly become overwhelming.
- Take regular breaks. Pushing yourself to go faster can be emotionally taxing and cause you to miss important things.
- Consult with a contractor or other professional who has experience with fire damage when you are assessing structural damage. The insurance company’s adjuster will likely get several quotes from the contractors they frequently work with.
- Document the damage in a variety of ways, including photographs, video, and written descriptions of the damage. When it comes to contents, equipment, or inventory, you may want to check undamaged filing systems or even your email for receipts and invoices.
You should also collect receipts for business expenses that you incur during the recovery period. Many of these expenses could be covered by your insurance claim, but you need to track and document them in order to receive compensation.
#3 Call Your Accountant
Call your accountant to discuss the expenses your business needs to keep up with during the period of restoration and make a plan for meeting your obligations. Your accountant can help you create a business plan for surviving the coming weeks and months. Cash flow may be an issue until your business insurance claim is settled. You might consider requesting a cash advance against business interruption insurance to meet the impending obligations you might not otherwise be able to cover. Keep in mind that if an advance is extended, this amount will be counted towards your coverage for that category, and you will likely have to substantiate the amount with proof that you did in fact cover business expenses.
Losing a business to a fire and flood can be just as difficult and emotionally taxing as losing your home. You will need sound financial advice in order to meet ongoing expenses until you are able to re-open. Insurance coverage for lost business income can be your lifeline. If you have extended coverage, you may even be able to receive supplemental compensation for revenues even after opening if they are below your pre-loss standards while the business gets back on its feet.
Your accountant may also be able to help you document the full extent of your loss and prepare an insurance claim.
#4 Get Your Insurance Policy
As you prepare to make your insurance claim, you will need to consult the information contained in your Declaration Pages and Long-Form Policy Booklet (LFPB). Your Declaration Pages are a summary of your insurance coverage, including listed perils and categories of coverage, the names of the insured, the address of the insured property, and policy limits. Your Long-Form Policy Booklet is the “fine print”, explaining the terms and limitations that apply to your coverage.
You may need to contact the insurance company for an updated version of both documents, including clarification of the policy limits that have been adjusted for inflation. It is common for insurance policies to update limits annually to account for inflation.
#5 Review Your Inventory
In addition to reviewing the damage to the structure and commercial contents and equipment, you will also have to undertake a review of your inventory. Properly reviewing inventory can be a long and challenging task even when your business is operational. If your inventory has been damaged by fire or flood, the task can be even more overwhelming. You may find these tips useful for documenting your inventory after a fire or flood.
- Avoid signing documents that indicate you have made your full claim until you have completed your inventory review and made a full assessment of the damages and property loss. You may submit provisional documentation to begin the process, but do not sign off until you are confident you have accounted for everything.
- Itemize the inventory first and worry about valuing later. You can work out final valuations once you have a comprehensive and complete list and documentation.
- Take photos of damaged inventory, especially inventory that you intend to salvage and remove from the site.
- Find receipts or invoices for inventory damaged by the fire or flood, if possible.
- Review your policy to find out if you are entitled to full retail value or replacement cost for the damaged inventory. Establish an accurate valuation for damaged inventory before finalizing your insurance claim.
#8 Secure and Remove Equipment and Supplies
Once you are able to re-enter the building, you may want to secure and remove any equipment that can be salvaged. Documents, electronics such as computers, and any equipment that may be at risk for further damage from the elements or looting should be salvaged if possible, but you must also document them precisely and let the insurer know what you’ve removed and where you’re storing it. The Insurer may want to inspect the items, so do not begin restoration without their approval.
#7 Find Out when You Can Reopen
Talk to contractors and your insurance company about getting an estimate for completion of repairs. The time it takes until you can reopen for business is called the “period of recovery,” and if you have business interruption and lost income insurance, the insurance company will want a timeline.
Once you have a repair timeline, you will be able to begin calculating timelines for finishing the replacement of inventory and equipment. You will also be able to start calculating the extent of your business interruption and lost income settlement.
If you have extended coverage, you might also be compensated for below-average revenue after you reopen. This may also account for extra expenses while you’re getting the business back on its feet. For example, coverage may be available for additional advertising to let your customers know about your reopening or the costs of hiring and training new staff.
#8 Restoration & Repair
Fires and floods can cause lasting damage to equipment and other contents even if they were not directly affected. Soot and smoke particles can settle into porous surfaces like fabric, and flood damage can encourage mildew and mold. You may want to look into restoration services that can salvage equipment, or talk to your insurance company about recommended restoration services.
Keep in mind that restoration services are paid for out of your coverage. If the insurer is recommending a service or company you are uncomfortable with, you may be able to request cash compensation instead, but you will then have to coordinate the restoration yourself. You can get more information about replacing the contents and equipment here.
You will want to act quickly to begin restoration, repair and/or rebuild work on the building itself. Smoke damage can escalate quickly with the passage of time. Within minutes, soot and smoke will cause yellow stains on walls and any items made from plastic. Within hours, acidity in soot can permanently tarnish or stain metal, while within a matter of days, yellowing on walls may become permanent and fabric may have to be replaced. If weeks pass by, soot can permeate building materials leading to corrosion and the release of toxic fumes in the air. Hiring an experienced contracting and/or restoration company will ensure that these concerns are managed effectively.
Always work closely with your insurance company on repairs and restoration. Remember that the adjuster works for the Insurer – he is their expert. You can give us a call for advice on how to proceed with your claim. Be careful to make sure the list of damaged and lost inventory and equipment is complete, and document everything closely.