Article Reviewed by a licensed insurance professional: Sam Meenasian (CA dept of insurance license #0F75955).
Estimated reading time: 5 minutes
Wildfires can threaten a business through direct fire damage, smoke, shutdowns, and long recovery timelines. For many companies, the best time to review insurance and continuity planning is before a loss happens. Because business insurance and disaster recovery affect financial stability and safety, the guidance should be specific, current, and trustworthy.
Property Insurance
If you own or lease business space, commercial property insurance should be one of the first coverages you review. It can protect buildings, furniture, fixtures, equipment, inventory, and other business personal property against covered causes of loss. Coverage may be purchased as standalone commercial property insurance or packaged in a Business Owners Policy, but actual recovery depends on exclusions, limits, deductibles, and whether the property is settled on actual cash value or replacement cost.
Owning a policy is not enough. You also need the right limits and valuation. An outdated building limit or low business personal property limit can leave a company badly underinsured after a wildfire. Before renewal, review your declarations page, endorsements, deductible, and valuation provisions with a licensed commercial insurance professional.
Business Income and Extra Expense
Property damage is only one part of the loss. Business income coverage, often called business interruption coverage, may help replace lost income when a covered peril causes direct physical loss or damage that suspends operations. Extra expense coverage can help pay reasonable costs to keep the business running, such as temporary office space, equipment rental, or other necessary operating costs. Depending on the policy, civil authority coverage may also matter when access is restricted after nearby covered damage.
This is where precision matters. Not every shutdown is covered, and not every policy includes the same business income terms. A business should review the covered causes of loss, business income wording, limits, and endorsements with its broker, carrier, or counsel if there is a live claim.
Business Continuity Plan
A business continuity plan is broader than a disaster recovery plan. Continuity planning is about keeping essential functions operating during a disruption. An IT disaster recovery plan is about restoring technology and systems. Ready.gov recommends organizing a continuity team, compiling a business continuity plan, and developing an IT disaster recovery plan in conjunction with it.
That planning gap is real. In a 2024 U.S. Chamber Foundation survey, only 26% of SMBs said they had an actual disaster plan in place, and 34% of disaster-affected SMBs said recovery took six months or more. A solid plan should identify critical functions, alternate work arrangements, employee contacts, key vendors, customer communications, and the person authorized to make closure and reopening decisions.
Offsite Data Storage and Record Protection
Offsite data storage is essential, but cloud access alone is not a complete recovery strategy. SBA recommends regular backups, including cloud backups where appropriate. CISA also recommends maintaining offline, encrypted backups of critical data and testing them to make sure they can actually be restored. That matters after a wildfire, but it also matters if a cyber event hits during recovery.
Back up more than day-to-day files. Store copies of insurance policies, lease agreements, payroll records, tax documents, vendor contracts, customer lists, inventory records, and banking contacts in a secure offsite system with strong access controls and multi-factor authentication. If your team cannot find the records needed to report a claim or resume billing, the recovery slows down quickly.
Employee Safety and Communications
A wildfire response plan should protect people first. OSHA says a thorough evacuation plan should define activation conditions, chain of command, routes and exits, emergency functions, procedures for accounting for personnel, customers, and visitors, and the equipment employees will need. A crisis communications plan should also explain how you will reach employees, vendors, and customers if the location is closed.
If your business has outdoor operations, smoke conditions may create a separate workplace safety issue. In California, for example, the wildfire smoke rule generally applies to most outdoor workplaces when the PM2.5 AQI reaches 151 or higher. Businesses should monitor the rules that apply in their own state and industry.
Reduce the Physical Risk Before a Loss
Wildfire mitigation and insurance should work together. Current wildfire-hardening guidance highlights practical steps such as Class A roofing, a 5-foot ember-resistant zone, ember-resistant vents, noncombustible materials near exterior walls, cleared vegetation and debris under decks, and compliance with defensible space requirements where applicable. These measures can reduce ignition risk and may also support insurability in some markets.
Prepare for the Claim Before the Fire
After a wildfire, strong documentation helps. NAIC recommends keeping receipts, documenting conversations with the insurer, and using an inventory to support the claim. State insurance departments can also help answer questions or assist if a dispute arises during the claims process.
If insurance does not cover the entire loss, additional recovery tools may still exist. SBA disaster loans can help eligible businesses with physical damage, operating expenses after a declared disaster, and approved mitigation improvements that reduce future damage.
Final Thought
Wildfires can do more than damage a building. They can interrupt revenue, delay payroll, cut off records, strain employees, and slow reopening. The businesses that recover best usually combine the right commercial property and business income coverage with continuity planning, tested backups, clear employee procedures, and practical mitigation steps. Before wildfire season, review your policies, limits, and plan with a licensed commercial insurance advisor so you know where the gaps are before a loss exposes them.
