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Assessing Insurance Coverage Before the Next Disaster
CNBC.com | January 18, 2012 | 05:11 PM EST

Guest columnist Mary Ellen Biery what companies need to do to assess needs before the next disaster strikes.

Natural disasters in 2011 caused a record $350 billion in damages — the equivalent of wiping out the entire market value of General Electric, Ford Motor, Hewlett-Packard and Kraft Foods combined.

But on top of the insured property losses , companies affected by the Midwest flooding, Japan’s earthquake and tsunami, and flooding in Thailand experienced major disruptions in supply chains and production, hurting results at such companies as Honda, Acer and Arch Coal.

Most large, multinational corporations know that disasters like those in 2011 could cause significant disruptions to their supply chains and production, so they often hedge their risk with business interruption insurance coverage, said Drew Olson, a manager in the Insurance Claims Services Practice at BDO Consulting .

And most small and mid-sized companies have property policies that include some coverage for business interruption, typically a nominal amount, Olson said. But smaller businesses sometimes struggle with the decision to increase their limits or expand the scope of coverage through policy endorsements, he added.

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