Safeco Survey Finds Small-Business Owners Ill-Prepared When Disaster Strikes

October 22, 2003

A new nationwide survey by Safeco Corp. found most small-business owners are ill-prepared to recover costs if disaster strikes, such as company’s payroll, operating expenses and profits, and aren’t well-informed about business income insurance, the coverage that can help them recoup those losses. Unfortunately, these costs collectively represent the most expensive losses small-business owners face if their property is destroyed and their business is shut down.

“This is a real problem in the small-business market. Too often we find that by the time entrepreneurs are able to rebuild their workplace, they’re in poor financial shape, and reopening is not easy,” said Caryn Siebert, vice president of claims for Safeco Property and Casualty Companies. According to Safeco’s survey of small-business owners:

*More than half (55 percent) said they do not have business income insurance;
*Even more (63 percent) say they are unfamiliar with business income insurance;
*Many may underestimate their risk. Nearly half (45 percent) estimated it would take them less than three months to recover to their current level of operations if their business was totally destroyed – half the time that insurance experts say is common; and
*Six out of ten say they don’t have the information they need to determine their business income insurance requirements.

“Most people assess their insurance needs based on the things they can clearly see — buildings and equipment that can be destroyed,” said Matt Coleman, president of Van Gilder Insurance Corp., an independent insurance agency in Denver, Colo. “Ironically, entrepreneurs’ bigger concern should be the lost revenues and additional costs they encounter while they get their business back on line. For small businesses, the need is even greater as they generally don’t have the luxury of multiple locations and redundant operations.”

Entrepreneurs who opt for a standard businessowners’ package (BOP) policy find that business income insurance is typically covered. But for the many others who don’t buy a BOP, business income coverage is optional, and more than half of those policyholders don’t buy it. Many others fail to purchase adequate levels of coverage, said Safeco’s Caryn Siebert.

Small-business owners typically take four to six months to rebuild their property and resume operations and another six months to a year to return to previous income levels if their property is destroyed and their company is shut down, Siebert said. Yet in Safeco’s survey, only 19 percent of all small-business owners said they thought it would take six months or more to recover to their current level of operations if their workplace was totally destroyed.

To make the process of estimating business income insurance needs simpler, Safeco has introduced a business income insurance education section and a new online calculator that allows small-business owners to estimate their business income insurance needs in minutes.

Small-business owners can simply log on to Safeco’s Web site at, respond to four simple questions about their net income, operating expenses, payroll plans, and expenses to instantly calculate their estimated business income insurance needs. The simple calculator replaces a lengthy questionnaire typically used in the business insurance market today.

Was this article valuable?

Here are more articles you may enjoy.