Is Flood Insurance Right for Your Small Business?

As we watch footage of the destruction Hurricane Sandy left in it’s path, now is the time for small business owners to reconsider their flood insurance coverage.

Floods are the most common of all natural disasters. You don’t have to live near water to be at risk of flood damage. Almost one-third of flood claims come from low to moderate risk areas. Almost 40% of small business never reopen their doors following a disaster because just a few inches of water can cause tens of thousands of dollars in damage. Nearly 20% of flood insurance claims come from moderate-to-low risk areas.

“The No. 1 thing people ask when they have a loss or a claim is, ‘Do I have that coverage?’” says says Jim Kinmartin, a commercial insurance agent. “The biggest thing I can convey is people thinking it will never happen to them, but when it does they learn the value of the coverage. A small premium every month in relation to a large loss is pocket change when it comes to that time of need and emergency.”

If a location hasn’t experienced a flood in the past, that’s no indication it will not flood in the future. Flood risk isn’t just based on history or location, it’s also based on a number of factors: rainfall, river-flows, topography and changes due to building and development.

“Obviously you can’t stop a natural disaster from happening,” says Kinmartin. “But if you’re prepared, it can make or break the survival of your business.”

Flood insurance covers more than just the insured building and it’s foundation. It also covers electrical and plumbing systems, debris removal, furniture and electronic equipment. Flood insurance is expensive, until the total value & protection it adds to your business is factored in. The premiums for flood insurance can exceed $3,000 per month for a small business under $500,000 in value in a low risk area to over $7,000 per month for the same business in a coastal high risk area. However, from 2007 to 2011, the average commercial flood claim was over $75,000.

Business owners need to assess their risk and discuss it with their insurance professionals. The federal government set up the National Flood Insurance Program through FEMA and the Department of Homeland Security to assist both residents and business owners in their decision. Flood insurance is affordable, uninsured flood losses are not.

For more information, check out the disaster relief pages of the Small Business Administration, FEMA, and the IRS.