Many organizations expect their insurance company to come in after a disaster strikes and take care of everything immediately. That is not necessarily the case, says Ron Cuccaro of Adjusters International.

Insurance clients have the obligation to mitigate the damages. "You can't say you're going to wait for insurance. It may be a month later," he explains.

For example, if the roof is blown off in a storm, the company must take steps right away to cover the area so no further damage occurs from potential rains. It cannot wait for the insurance company to do so and then expect insurance to cover any damage that happened because the area wasn't tarped, Cuccaro says.

"You need to almost act as if you don't have insurance," Cuccaro says.

Consider off-premise losses. For example, your company could go through a hurricane and sustain no physical damage. However, business is interrupted because power is out for days. Insurance covering hurricanes would not cover the losses incurred because the property experienced no physical damage. Off-premise power interruption coverage would cover the losses.

If a civil authority closes an area, then insurance generally covers two weeks for business interruption even though your company may not have experienced property damage, Cuccaro says.

Insurance companies pay for time to repair damage but not for time to get the business up and running as usual. Damages could be fixed in a month, but your business may not experience the same level of customers for four or five months. To sustain that prolonged business interruption, additional insurance would need to be purchased prior to the disaster, Cuccaro says.

Business also can be affected even if they are physically far away from the actual destruction because a key customer or supplier may operate in the disaster region. A typical insurance policy provides no coverage for loss sustained for a customer or supplier disruption. However, businesses may want to consider adding a customer and/or supplier endorsement (dependent property) to protect themselves in those situations.

Cuccaro says a previous client sold chicken feed to farmers in Jamaica. A 1987 storm wiped out the poultry and the client could no longer sell his feed to the farmers. Because he had a customer and supplier endorsement to his insurance policy, he was able to recover damages.

Another client, a lock manufacturer, was saved with an endorsement policy after its component supplier in Mexico was destroyed in a fire.

Companies also need to ensure that they are insured properly. For example, replacement cost insurance only kicks in if the insured is putting the money back into the destroyed property. You first collect on the depreciated value. For example, a company could collect the $500,000 value of its 50-year-old building. However, to rebuild the structure and meet current codes, the cost will be $1 million. It would need to be insured properly for replacement value to recoup the cost of rebuilding its structure.

As such, review policies periodically to ensure that they cover true replacement costs, which may be more than the property's market value.

Businesses also should be aware that the onus is on them to prove their claims. "It isn't a situation where an insurance company comes in and hands over a check," Cuccaro says.

He notes that companies need to inventory and itemize the losses as well as provide necessary reports such as engineering etc. to ensure the claim is properly documented.

Professional adjusters represent the insured. Insurance adjusters represent the insurance company.

Drum says he found it helpful to hire a controller after disaster struck. This individual dealt with grant applications as well as insurance claims. "It's a difficult battle—don't settle on first shot," he advises. Companies wanting the money right away who don't have an advocate may accept the first offer, but those who aren't ready to throw in the towel could get as much as 50 percent more, Drum notes.

Donna Childs, a former senior reinsurance executive, says she finds many small business owners do not have adequate documentation to process their insurance claims. Readily available papers should include key documents such as office leases, payroll records and anything that can substantiate asset values. Childs say she takes digital photographs of her company's assets so she can access them online as well as offsite.

Childs also cautions that businesses understand the provisions of their commercial insurance policies. "It's important to read the policy carefully," she says. e