According to the official site of the National Flood Insurance Program, Flood Smart.gov., 40% of small businesses that experience flooding never reopen. This is because damages from even an inch or two of water can cause thousands of dollars worth of damage that many small business owners simply can’t recoup from financially. There are four important questions to ask yourself about your small business to determine if you need flood insurance. You might find that flood insurance is absolutely necessary to mitigate the cost to clean-up, repair, and reopen.
1. What is your flood risk level?
Certain commercial properties must have flood insurance coverage. These are businesses with locations in federally determined high-risk flood areas. However, businesses in moderate-to-low flood risk areas might need flood insurance, as well. Has your business area ever been flooded? Have nearby residences or businesses ever been flooded? Is your business located near a waterway of any kind or near construction projects that might increase the chances of your business flooding? If the answer to any of these questions is “yes,” you should consider purchasing flood insurance for your business.
*Be advised that most policies take a minimum of 30 days to activate, so it is best to get one well in advance of the rainy season.
2. Can you reduce potential flood loss of business assets by relocating them to higher ground or building flood barriers around your business property?
If you have any concerns about potential flooding, it might be prudent to look into the possibility of fortifying your business property with flood walls or other protective measures. However, this can be a costly endeavor. The most cost effective means of preparing you property for a possible flood event is to strategically place your business assets to mitigate the cost of damages. This includes such measures as making sure all expensive equipment is housed above ground level, including electrical boxes and furnaces. It may mean that any costly inventory and supplies normally stored in a basement level area must be permanently moved to a storage facility’s second floor area.
*Be advised that if you do purchase flood insurance, property flood insurance won’t cover building contents and vice versa. You must be careful to get the right coverage for your small business situation. You might need both types of flood insurance coverage, or if you rent your business space, just contents coverage.
3. What is the total cost of your business assets susceptible to flood damage or destruction?
It is important to know just how much money it would take to replace or repair your business assets to get you back up and running. Once you know the needed dollar amount, if you don’t have sufficient savings to cover flood damage costs, flood insurance might be your only option to get your business back in operation.
*Be advised that not all business assets are covered by flood insurance. Standouts include self-propelled vehicles like cars and landscaping. Do not assume everything is covered. Be sure to go over all flood insurance policy exclusions as they pertain to your business assets.
4. Do you have enough extra funds to cover costs of vandalism during down time or a subsequent flood event within the same year?
You may have enough savings to get your business repaired just once after a flood event. However, your property could be vandalized or robbed during the repair process, or another flood event could occur in the same year. Do you have enough assets to rebuild the business twice? Even if you don’t opt to use your flood insurance during a first devastating event, you will probably be grateful for the coverage if another event follows shortly thereafter.
Keeping a small business going is challenging enough without having to consider the effects of a flood. However, it is best to be proactive and purchase flood insurance if there is a chance that a flood could entirely wipe out your business. Take the time to think out what type of coverage is the best for your small business. Don’t assume everything is covered. If you don’t see a particular asset in writing, ask your flood insurance agent about it. The right coverage could keep your business from financial ruin after a flood.
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