For business owners, these can be the best or worst oftimes.

It can be the best of times if you are running your businesswell, finding a niche in which you can thrive and experiencingsuccess. However, the worst of times can be inflicted upon you byoutside forces: crime, weather or some other power beyond yourcontrol.

Unfortunately, we see it time and again. Over the past year,we’ve seen businesses trashed by civil disturbances in Ferguson,Missouri, and Baltimore, Maryland. While 2014 was a relativelybenign year for hurricanes in the United States, they still causedtens of millions of dollars in damage. Last year there were atleast 831 confirmed tornadoes in the United States according to theNOAA. Now as we head toward summer, we’re looking at the start ofanother tornado season in the Midwest, and hurricane season in theSoutheast.

While we hope these events will not occur, hope is not astrategy. A forward-thinking business prepares for potentialcalamity while hoping it never comes.

Unexpected events can happen anywhere, at any time, and coulddeal your business a crippling blow. According to the SmallBusiness Administration, as much as 60% of small businesses neverreopen their doors following a disaster. Small businesses arefrequently underinsured and many do not carry sufficient businessinterruption coverage.

Whether it’s protests that get out of control, flooding causedby a hurricane, wind damage from tornados or the rising tide ofcybercrime, businesses need to prepare for business interruption.Unfortunately, many small- to medium-sized companies fail to taketime to do the needed scenario planning to protect their interestsfrom disasters, and yet their survival may be at stake.

Business interruption insurance has become an essential risktransfer tool. Coverage provides resources that aid in recoveryfollowing a catastrophic event and can help get a company back onits feet quickly, enabling it to pay staff, meet creditobligations, and provide peace of mind for employees andshareholders.

Here’s how business interruption insurance works: Coverage iscomposed of two parts – business income and extraexpense.

Business income coverage insures net income that wouldhave been earned. “Would” is the key word here because unlike aloss due to physical damage, business income is based onassumptions of what would have happened had there been noloss. Business income insurance provides coverage for operatingexpenses that continue even after a loss such as payroll, leasesand mortgages, and employee benefits. This insurance is atremendous incentive for key employees to continue working for thebusiness rather than seeking employment elsewhere.

Another component of business interruption insurance is extraexpense coverage. This covers potential costs beyond normaloperating expenses, including any expense that helps avoid orminimize business downtime and allows operations to continue. Forinstance, the cost of renting office space at a temporary locationwould be covered. Relocation expenses and costs to equip andoperate a replacement or temporary location are also consideredextra expenses.

Recent news headlines put the emphasis on an additionalcomponent of business interruption coverage that should beconsidered: civil authority insurance, which covers a loss ofbusiness triggered by a governmental action (police commissioner,mayor, state attorney general, etc.) that restricts access to theinsured premises. A great example is an ordered evacuation ahead ofa hurricane that’s about to come ashore.

Determining the exact business interruption coverages yourcompany needs can be a rather complex process. It takes time to doscenario planning and work through the various potential calamitiesthat could befall a business.

While many business owners and managers don’t want to considerthese pessimistic scenarios, taking a cold, hard look at thepossibilities is a smart thing to do. After all, there’s some truthto the title of the business book from former Intel CEO Andy Grove,Only the Paranoid Survive.

But don’t consider planning for calamity as paranoia. Think ofit as advanced preparation that just might help your businesssurvive if a disaster strikes.

Jon McDonald delivers consultative P&C risk managementservices on behalf of Corporate Synergies Property & CasualtyPractice. He provides expert advice across all property andcasualty lines and facilitates the design and implementation ofrisk management solutions. He has advised national and globalclients in a wide range of industries, including commercial realestate, manufacturing, wholesale and distribution, hospitality andhealthcare.