Alabama Business Owners Urged to Insure Before Disaster Hits

March 7, 2008

When the roaring 170 mph winds descended on Alabama’s Lawrence County on Feb. 6, Bobby Thurman’s first thought was not the financial strength of the poultry operation he manages for Smith Poultry.

As flames licked the walls of The Brick Deli in Decatur in September 2006, co-owner David Champlin had more pressing fears than the restaurant’s post-disaster viability.

But as the terror of those nights subsided, Thurman and Champlin had to study their options. Both wish they had been more prepared for the disasters that shook their businesses.

High on the list of items they wished they had paid more attention to was insurance.

“We had some insurance but not enough,” Thurman said. “That’s the way it usually is.”

The shortfall was a business disaster for the company. The tornado destroyed two of its four chicken houses, and Thurman said he does not plan to rebuild.

Thurman was fortunate in that all the chickens from the destroyed chicken houses had been picked up the Sunday before the tornado, but the structural loss was complete.

The Brick had less insurance than it needed, too.

“We bought insurance when we started the business, but then quit thinking about it,” said Champlin of his popular downtown Decatur restaurant. “We kept adding equipment, but we did not increase coverage. We took a hit.”

Fortunately their agent had encouraged The Brick’s owners to purchase business interruption and extra expense insurance.

That year of income, Champlin said, made it possible to reopen the restaurant.

Business is great at the new location, Champlin said, but he stresses the success was in spite of a lack of disaster preparation.

“The Decatur community really rallied around us,” he said. “Everybody helped. We could not have done it otherwise. If we had been a new business and people had not known about us, we would not have had a chance.”

He said he and the other owners hope to renovate the upstairs of their 112 E. Mouton St. location soon.

Jo Hunter, part owner of Rankin Shelton Hunter Insurance, which has offices in Decatur and Moulton, said it is human nature to be inadequately insured.

“With most people complete coverage is not important when you’re buying insurance, it is only important when you need it,” Hunter said. “Unfortunately that is what happens in a lot of cases.”

Hunter said she tries to communicate the importance of complete coverage to her clients, but it rarely sinks in.

“The only thing I can do is talk to them about it. Make them aware of it. It has to be their decision,” Hunter said.

“I would like to think most of my customers know me well enough to know that I am not just trying to sell them something. The problem is that most people do not want all of that when they are buying it. They only want it after there has been a loss. I do not mean that in a bad way, it is just human nature.”

Insurance needs to be a high priority, said Thurman.

Any business owner who learned from watching the Lawrence County tornado damage should take a simple step, and should do it now.

“Just check your policy,” Thurman said. “Make sure you have coverage. Make sure you have tornado coverage, and coverage that covers the contents as well as the structure.”

Hunter said the most common mistake business owners make is not getting adequate coverage on the building or contents.

She said purchasing replacement value coverage, which does not decrease with depreciation of the covered items, is a wise move.

She seconded Champlin on the importance of coverage for lost business income.

“There is always the question of whether the business can remain viable while it is getting the property back in order,” Hunter said. “Loss of business income and extra expenses that go along with that can be crippling. That is something that people do not think about a lot of times until they really need it.”

She said some business policies have lost-income coverage built in, but the insured must elect it with many policies.

“That is always a really big thing to look at,” she cautioned. “If it is going to take six months to get your building built back, in order for you to take care of business, is there going to be money to keep your key employees employed? They can’t go without a check for six months. Do you want to risk losing those employees, or incur the extra expense of business income coverage?”

Different businesses, Hunter said, have different needs.

A good insurance agent can help business owners anticipate problems.

Restaurants, for example, should have coverage that protects against food spoilage in case lost power coincides with a disaster. Businesses need to update frequently coverage for lost cash or securities.

Disaster preparation, experts say, requires more than good insurance. It requires a business continuity plan.

The worst possible time to figure out what business functions are critical is after a disaster strikes.

Go through that inexpensive exercise now, and it could help your business survive.

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