With a growing number of severe storms, hurricanes and other weather events impacting the United States annually, the need for flood insurance has grown dramatically.
As it stands, most businesses have had to buy flood insurance for more than a decade from the federal government and private insurers. Those federal flood policies usually exclude business interruption (BI) coverage. And nothing interrupts business more than a flooded office with valuable papers and equipment drowning in water.
Flood insurance isn’t a small amount of money and any businesses of any size should be asking the right questions of brokers to ensure they get the policies they need. Here are a few things to think about when looking at buying your next flood insurance policy, or while reviewing your current one.
Since you’re not likely to be an expert on floods, these questions should be directed to your broker. He or she will have answers or will be able to get them. Much of the information is available on the web, too, although such sites are best navigated by experts.
- Do you need more flood insurance than Federal Emergency Management Agency offers businesses? Probably, since FEMA only covers up to $1,000,000 in losses for non-residential buildings. Policy limits can be set from $50,000 to $1,000,000 and cover everything or just the contents of buildings.
- Is your location in a Federal Emergency Management Association (FEMA) designated flood risk area? What does their mapping show for the risk on your business site? FEMA’s maps are constantly updated for the Flood Insurance Rate Maps (FIRM). You will want to understand your risk associated with floods and have the appropriate level of coverage. If your policy falls short of the mark you may be liable for more damage than you expected.
- FEMA’s maps have been labeled notoriously inaccurate, especially after Katrina, Ike, Gustav and other major storms, floods and catastrophes. Fortunately, the U.S. Army Corps of Engineers is also mapping for floods and sharing the information with FEMA, businesses and others. More than a few properties have changed from moderate high-risk flood zones to high-hazard flood zones. It’s critical for insurers to inform clients of the appropriate risk for their zone. Ask your broker to check out the Corps of Engineers flood-risk designation for your business.
- With rezoning and remapping becoming more common since the devastating hurricane season of 2005, many insurance buyers have challenged the flood zones determined by FEMA. This is often done through a Letter of Map Amendment (LOMA), which can be completed by a surveyor credentialed to evaluate a location’s Finished Floor Elevation, Base Flood Elevation and the location’s proximity to a body of water.
- Be aware of flood reform. FEMA is escalating its rates because the insurance was federally subsidized and its costs have contributed substantially to the national debt. Among many changes, FEMA plans significant increases for businesses, residences and second homes in flood-prone areas like the Gulf Coast, the Eastern Seaboard and other coastal locations.
Finally, do not forgo flood insurance, and make sure your policy is strong enough to cover your assets. You may work on a high hill or in a dry desert climate in the West but a hard rain’s going to fall at some point in your business’s existence. For a modest sum of money you can protect your physical assets. Spending a little money now could save you much more in the future.