By David Wilhite
What do you think is the most common natural disaster occurring in the United States today? Judging by the popularity of such recent blockbuster films as Twister, Volcano and Dante's Peak, one might easily guess that 200-plus mile-per-hour tornadoes (complete with flying cows) and the volcanic destruction of Los Angeles are normal, everyday occurrences. Despite what Hollywood would lead you to believe, however, the truth is that the vast majority of all natural disasters--more than 90 percent--that occur in the United States today are flood-related.
Floods are more than 25 times as likely to occur in high-risk areas than fire. Yet, of the estimated 10 to 12 million business owners who should have flood insurance, approximately 7 to 9 million are not covered. Unfortunately, far too many self-storage facility owners fall into this group. For example, there was a major flood in New York last year that resulted in 1,298 flood claims totaling nearly $1.5 million in damages, but only 92 of the claims were actually covered. Part of the reason for this situation is that many people don't find out that their insurance doesn't cover flooding until it's too late. But what's even more surprising is that many business owners, including those who have personally sustained flood-induced losses, choose to go without flood insurance, perhaps in the belief that flooding is a once-in-a-lifetime occurrence that only strikes high-risk areas. Nothing could be further from the truth.
The National Flood Insurance Program (NFIP) divides risk areas into three basic groups: low, medium and high. Less than one-third of all reported flood claims come from high-risk areas, and more than one quarter come from low-risk areas. That's why most business insurance experts strongly recommend that you secure flood insurance, even those in low-risk areas. Remember, your facility doesn't have to be located near a river or a lake to be at risk; heavy storms, winter run-off and local drainage problems can cause just as much destruction as local waterways overrun by spring rains.
The good news about flood insurance is that you can get affordable coverage, even if your facility is located within the boundaries of a flood plain. The National Flood Insurance Program and its Write Your Own (WYO) servicing companies guarantee coverage for anyone living in a high-risk area, regardless of location. Flood insurance averages about $300 per year for businesses (and just $150 per year on average for homeowners), and a special low-cost Preferred Risk Policy is available for those businesses located in less-hazardous areas. Keep in mind, however, that while you can purchase flood insurance at any time, there is a 30-day waiting period from the date of your application before coverage goes into effect. You can't just call your agent when the rain begins to fall to put coverage in place.
The maximum amount of flood coverage currently available through the National Flood Insurance Program is $250,000. Depending on the area where you live, though, it may not be necessary to purchase flood insurance at maximum amounts. If you are located outside a designated high-risk area, you can purchase partial coverage and receive an ACV (actual cash value) payout for damages up to the purchase amount. However, if you have a lot of equity in your buildings and property, you may want to consider purchasing Excess Flood Protection, which is available up to twice the regular limit. This extra protection may be very prudent given today's inflation and excessive construction costs.
Last, but not least, don't wait until disaster strikes your business. Assuming you have or are planning to get flood insurance for your self-storage facility, now is a good time to take preventive action to minimize your flood-risk exposures and reduce damage claims. The following checklist will help you get started:
- Establish an action plan for monitoring storm activity, preparing for flood conditions and implementing emergency-salvage operations.
- Know the history of the area in which you live to better anticipate flooding potential.
- Document the interior and exterior of your facility and valuables with a camcorder or Polaroids to aid in the event of a claim.
Flood Watch Precautions
- Monitor weather reports through the National Weather Service.
- Ensure all doors, etc. are tightly secured.
- Check conditions of flood doors, gates, walls, dikes, berms, etc.
- Test all sump pumps for proper operation.
- Shut off gas and electrical service immediately upon detecting flood conditions.
- Back up all vital computer files and records and store in a secure location.
- Relocate valuable possessions to safe elevations.
- Stay calm if disaster threatens. Be prepared to evacuate the area immediately.
- Begin cleaning and drying salvage activities immediately, giving priority to your most valuable property and possessions.
- Remove flood debris and drain all standing water as soon as possible.
- Dehumidify damp areas as thoroughly as conditions allow.
- Return fire protection systems to full operation as soon as possible.
- Carry valid identification, along with proof of residency and your business license.
- Drive carefully through debris-strewn areas and those with standing water.
- Contact your insurance claims representative immediately for adjusting and related services.
Remember, there is a 30-day waiting period from the date of your application for flood insurance, so don't wait; one low annual premium can protect you and your self-storage facility.
David Wilhite is the marketing manager of Universal Insurance Facilities Inc. Universal offers a complete package of coverages specifically designed to meet the needs of the self-storage industry, including loss of income, employee dishonesty, comprehensive business liability, hazardous-contents removal and customer storage. For more information, contact Universal at Box 5400, Scottsdale, AZ 85261-9957; phone (800) 844-2101; fax (602) 970-6240; Web: www.vpico.com/universal.