Business Continuity Planning for Texas Businesses: Insurance Is Just the Start

Texas businesses face an unusually wide range of threats: hurricanes along the Gulf Coast, tornadoes across the plains, wildfires in the west, flooding statewide, ice storms in the winter, and cyber attacks year-round. Any one of these can shut down your business for days, weeks, or months.

Insurance pays for the physical damage. But a business continuity plan (BCP) is what keeps you operating — or gets you back up and running as fast as possible — when disaster strikes.

A business continuity plan is a documented strategy for how your business will continue operating during and after a disruptive event. It covers everything from who's in charge when the owner is unavailable, to where employees will work if the office is inaccessible, to how you'll communicate with customers during a crisis.

A BCP isn't just for large corporations. Small businesses are often more vulnerable to disruptions because they have fewer resources to absorb the impact. According to FEMA, 40% of small businesses never reopen after a major disaster.

Before building your BCP, make sure your insurance coverage is solid. The key commercial coverages that support business continuity are:

This is the most directly relevant coverage for continuity planning. Business interruption insurance (also called business income insurance) replaces lost revenue and covers ongoing expenses — rent, payroll, utilities, loan payments — while your business is shut down due to a covered loss.

Key things to understand:

• Waiting period — most policies have a 72-hour waiting period before coverage kicks in
• Indemnity period — coverage lasts for a defined period (typically 12-24 months); make sure yours is long enough
• Actual loss sustained — coverage is based on your actual lost income, not a fixed amount; keep good financial records

Covers additional costs you incur to keep operating after a loss — renting temporary space, leasing replacement equipment, paying overtime to catch up on orders. Often bundled with business interruption coverage.

Covers lost income when a key supplier or customer suffers a loss that disrupts your business — even if your own property is undamaged. Increasingly important in today's interconnected supply chains.

Covers the physical damage to your building, equipment, and inventory. Make sure your coverage limits reflect current replacement costs — not what you paid years ago.

For many businesses, a cyber attack is now the most likely cause of a significant business interruption. Cyber liability coverage includes business interruption for system outages caused by attacks.

Identify your critical business functions — the activities that, if interrupted, would have the most severe impact on your revenue and operations. For a restaurant, that might be the kitchen and POS system. For a law firm, it might be client files and billing software.

For each critical function, determine:

• How long can you operate without it?
• What's the financial impact of each day of downtime?
• What resources are required to perform it?

Texas-specific risks to plan for:

Natural disasters: Hurricane season runs June through November. Tornado season peaks in spring. Flooding can happen any time of year. Wildfires are a growing risk in central and west Texas.

Utility outages: The February 2021 winter storm knocked out power for millions of Texans for days. Have a plan for extended power outages.

Cyber attacks: Ransomware, phishing, and data breaches can shut down operations as effectively as a physical disaster.

Key person dependency: What happens if the owner or a critical employee is suddenly unavailable? Many small businesses are dangerously dependent on one or two people.

Supply chain disruption: If a key supplier goes down, how will you source materials or products?

For each critical function and risk, develop a specific recovery strategy:

Alternate work locations: Can employees work from home? Do you have a backup location? Cloud-based systems make remote work much easier.

Data backup and recovery: Back up critical data daily, store backups offsite or in the cloud, and test your ability to restore from backups regularly.

Vendor and supplier alternatives: Identify backup suppliers for critical materials and services before you need them.

Communication plan: How will you notify employees, customers, and vendors during a disruption? Maintain an up-to-date contact list and designate a communication coordinator.

Emergency cash reserves: Insurance claims take time to process. Having 2-3 months of operating expenses in reserve can be the difference between surviving a disruption and closing permanently.

Write down your plan — a plan that exists only in someone's head isn't a plan. Include:

• Emergency contact list (employees, key vendors, insurance agent, bank)
• Step-by-step procedures for your most likely scenarios
• Location of critical documents (insurance policies, contracts, financial records)
• IT recovery procedures
• Employee roles and responsibilities during a crisis

Train your team. Run a tabletop exercise at least once a year — walk through a scenario and identify gaps in your plan.

Your business changes. Your plan should too. Review your BCP every year and after any significant change to your business — new location, new employees, new systems, new products.

Hurricane preparedness: If you're in a coastal county, develop a specific hurricane plan. Know your evacuation routes, have a plan for securing your property, and understand your insurance coverage for wind and flood damage (remember — they're separate policies).

Flood planning: Even if you're not in a flood zone, have a plan for flooding. Move critical equipment and records to higher ground. Know your flood insurance coverage and the claims process.

Winter storm preparedness: After 2021, every Texas business should have a plan for extended cold weather and power outages. Insulate pipes, have backup heat sources, and know how to shut off water if pipes freeze.

Wildfire planning: If you're in a wildfire-prone area, have a defensible space around your property and a rapid evacuation plan for equipment and records.

Your insurance agent is a key partner in business continuity planning. We can:

• Review your current coverage for gaps that could leave you exposed
• Help you calculate the right business interruption coverage limits
• Explain how your policies work together during a claim
• Connect you with risk management resources

TIV9 Insurance works with Texas businesses across all industries to make sure their coverage supports their continuity goals. Call us at (281) 685-6021 or request a free quote to review your coverage today.