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5 Ways To Reduce Financial Impact Of A Fire on Businesses

Business Insurance Liability Insurance Business Interruption Insurance Property Insurance Owner Builders Insurance Fire Protection Industry Insurance Commercial Property Owners Insurance

We all know fires can be devastating, but even the smallest of fires can have major implications on businesses.

A few years ago, a small fire broke out in 1 of the tenancies of an older commercial building I insured. Thankfully, fire services responded very quickly in the early hours of the morning and the fire was contained with minimal physical damage to the other 5 tenants.

There was however, extensive smoke damage throughout the entire building and all of the businesses lost 1-2 weeks of income whilst the property was made safe and thoroughly cleaned. Afterwards, business trading was impacted for another 3 months as the old wooden roof trusses were replaced with steel ones. You can read more on the impacts of extra costs of building reinstatement here.

But it’s not just rebuilding and reinstatement timeframes that businesses need to consider. What about:

the physical and mental health impacts on staff, especially if a fire occurs during trading hours
reputational damages following loss of life or severe injuries
time delays in replacing specialist equipment
your time in dealing with insurance claims and attending court cases and investigations, particularly if there is a workplace health & safety enquiry
environmental damages including impact on cultural heritage
fines and penalties

We’ve outlined below 5 things you can do to mitigate and protect your business from the financial and secondary effects of a fire.

Fires within a business can have major implications that can go beyond damage to buildings and stock.

1. Establish a Safety & Evacuation Plan

Reduce the risks of injury and impacts on staff by establishing a Safety & Evacuation Plan that can easily be reviewed & updated annually. Include things like:

What to do
Where to go
When to leave
Who’s in charge
Emergency Kit including:
- Spare laptop/mobile phone, chargers & batteries
- Emergency phone numbers beyond 000 including electricity, gas, water & telecommunications companies; staff next of kin; insurance company details.
- First Aid kit & manual
- Fresh water
- Copy of important business records including insurance policies, financial records, key supplier & customer details
- Latest stock & equipment inventory
- Spare keys for buildings, vehicle & equipment
- Hardcopy of your disaster recovery plan
Management Liability Insurance

Management Liability insurance is designed to provide protection to both the business and its directors or officers for claims of wrongful acts in the management of the business.

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Business Insurance

A business insurance pack can provide cover for your business premises and contents, against loss, damage, theft or financial loss from an insured interruption to the business.

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Business Package

Purchase up to six products under one Business Insurance Package.

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- Spare laptop/mobile phone, chargers & batteries
- Emergency phone numbers beyond 000 including electricity, gas, water & telecommunications companies; staff next of kin; insurance company details.
- First Aid kit & manual
- Fresh water
- Copy of important business records including insurance policies, financial records, key supplier & customer details
- Latest stock & equipment inventory
- Spare keys for buildings, vehicle & equipment
- Hardcopy of your disaster recovery plan
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Regular training schedule for all staff

Does your business have an evacuation plan in place?

2. Prepare a Disaster Recovery Plan

The best way to keep incoming cash flow steady, is to plan ahead and know exactly what you need to do to reduce the interruptions on your business activities as much as possible. Whilst every business is unique, the main points of consideration here are:

Types & severity of potential risks
Resources the business will need to keep going, where to find them & current availability
2-3 other potential temporary and permanent premises from which you can operate
Disaster recovery cashflow budget
Consider needs of the business following both a major devastation and a smaller partial loss scenario
Data recovery process
How, when and what to communicate to key customers and suppliers

Always have a back up plan in case a devastating event occurs to your business.

3. Purchase Quality Business Interruption/Loss of Profits Insurance

Not all insurance covers are the same, but correctly setting sums insured and sub-limits does not have to be overly complicated.

Always purchase a minimum of 12 months indemnity cover, 24 months if you own the building
Insure your trading gross profit not your accounting gross profit
Include 100% cover for staff wages to retain your people and avoid the additional recruitment and training costs
Include Additional Increased Costs of Working for a minimum of 10% of your gross profit sum insured
Use forecast/budgeted financials to set sums insured going forward to avoid underinsurance should you have a claim at the end of your policy period
Include Claims Preparation Expenses so you may appoint a specialist accountant to assist you with claim preparation to maximise your claim settlement

4. Consider Management Liability Insurance

We recommend all businesses purchase some level of Management Liability insurance. Whilst the primary purpose of this policy is to provide indemnity to directors and officers personally for their day to day management decisions, it will also provide cover for:

your time in attending court cases & investigations following the fire or a workplace health & safety enquiry
legal defence costs and reputational protection costs on account of formal investigations or claims against the directors or company themselves
fines and penalties resulting from the fire and/or workplace injuries

5. Retain the services of a Qualified Risk and Insurance Adviser

A qualified risk and insurance adviser will assist you with understanding the risk in your business and arranging the correct level of insurance protection. An adviser will also be your advocate with Insurers and help you with negotiating, managing and expediting insurance claims settlements.

General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.

Clear Insurance Pty Ltd. ABN. 41 601 916 689. AFSL No. 548953.

General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.

All information above has been provided by the author.

Lisa Carter, Clear Insurance, ABN 41601916689, AFSL 548953

This article originally appeared on Clear Insurance In The News and has been published here with permission.