By David Wilhite
More businesses are damaged by floods each year than by any other type of natural disaster. Flood damage can happen to any business at any time--you don't have to be located near water to be at risk. Heavy rains or winter-water runoff can cause flood damage, even in areas not normally prone to flooding. But did you know losses due to flooding are excluded from coverage under most commercial-property policies?
Many business owners don't realize they are not covered against flood until it's too late. Fortunately, it's easy and inexpensive to protect yourself against flood through the the National Flood Insurance Program (NFIP), which is backed 100 percent by the federal government. Making plans to insure your self-storage facility against flood now will keep you liquid when the waters do rise.
The NFIP divides risk areas into three basic groups: low, medium and high. Somewhat surprisingly, less than one third of all reported flood claims come from high-risk areas; slightly more than one quarter come from low-risk areas. That's why many business-insurance experts strongly recommend you secure flood insurance, even if you are located in a low-risk area. Remember, your facility doesn't have to be located near a river or a lake to be at risk; heavy storms can cause just as much destruction as local waterways overrun by spring rains.
The good news about flood insurance is that anyone can get affordable coverage, even if his facility is located within the boundaries of a flood plain. The NFIP and its write-your-own servicing companies guarantee coverage for anyone living in a high-risk area, regardless of location. The typical commercial flood policy costs, on average, just a little more than a dollar a day, and a special low-cost preferred-risk policy is available for businesses in less hazardous areas. Keep in mind, however, that while you can purchase flood insurance at any time, in most cases, 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 NFIP is $500,000. Depending on the area where you live, though, it may not be necessary to purchase flood insurance at maximum amounts. If you are 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 can provide total coverage for up to $1. 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 going to get) flood insurance for your self-storage facility, now is a good time to take preventive action to minimize your flooding risk exposures and reduce damage claims. Remember, in most cases 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 facility.
In addition to loss-of-income and extra-expense coverages, Universal Insurance Facilities Ltd. offers a complete package of coverages specifically designed to meet the needs of the self-storage industry. For more information, or to get a quick, no- obligation quote, write P.O. Box 40079, Phoenix, AZ 85067-0079; phone 800.844.2101; fax 480.970.6240; e-mail [email protected]; www.vpico.com/universal.