Responding to Disasters and The National
Flood Insurance Program

Most businesses owners are complacent about natural diasters until it happens to them. In light of the flooding disaster in Nashville and the tornado destruction in Oklahoma, now is a fitting time to make sure you have sufficient coverage to pay for the indirect costs of a disaster — the disruption to your business — as well as the cost of repair or rebuilding.

Of all businesses affected by a disaster, more than 25–percent never open their doors again. While there’s no way to lower the risk of a natural disaster from hurricanes, there are critical measures that can be taken to protect your company’s bottom line from nature’s fury. A disaster plan and adequate insurance are keys to recovery.

Here are some things to consider to make sure you are prepared for whatever mother nature throws your way:

Develop a Disaster Recovery Plan

  • Set up an emergency response plan and train employees how to carry it out. Write out each step of the plan and assign responsibilities to employees.

  • Decide on a communications strategy to prevent loss of customers.

  • Protect employees and customers from injury on the premises and protect your building.

  • Compile a list of important phone numbers and addresses.

  • Back–up computerized data files regulary and store them off-premises.

  • Identify critical business activities and the resources you need to support them.

  • Find alternative facilities, equipment and supplies, and locate qualified contractors.

Review Your Insurance Plan

  • Your disaster recovery should include a detailed review of your insurance policies to ensure there are no gaps in coverage. This includes property insurance, business interruption insurance and extra expense insurance.

Flood Insurance — What you need to know

You should be aware that a general policy will not cover flood damage, and this type of insurance is only available through the National Flood Insurance Program (NFIP). The NFIP will cover all the types of floods discussed above, including mudslides, though it is important to note that it does not cover landslides even if they are caused by heavy rain. To make sure you get a fair price, every commercial flood agent answers to this government agency; therefore, flood insurance is backed by the government but sold through private insurers.

NFIP Coverage: Who Should Buy It?

There are two main flood hazard level standards and several sub-categories that the NFIP uses to categorize a company’s risk for flooding and to determine premiums.

  • Moderate–to–low–risk buildings, which are in zones B, C and X.

    These areas are outside of the one–percent annual chance floodplain, areas of less than one–percent annual chance of sheet-flow flooding where average depths are less than one–foot, areas of less than one–percent annual chance stream flooding where the contributing drainage area is less than one–square mile or areas protected by levees.

  • High–risk buildings, which are in zones A and V.

    • Zone A buildings are within a certain floodplain distance from a river, lake or stream

    • Zone V buildings are within a certain distance from the coast and exposed to natural disasters associated with the ocean

For a complete list of sub-categories and to map out which zone your business or branches of your company falls in, visit www.floodsmart.gov, the official Web site of the NFIP.

What Gets Covered

There are two types of commercial building flood insurance coverage, and you can opt to buy one or both.

  • Commercial Contents covers inventory, merchandise, machinery and any other contents your business has up to $500,000
  • Commercial Building covers you company’s building up to $500,000. Even if your company does not own the building, you are able to insure the value of the improvements you made to the space.

If the value of your business is more than $500,000 in either of these areas, you can purchase an excess flood policy to provide total coverage up to $1 million.

In addition to these two types of building coverage, the NFIP also will keep you covered for flood protection, prevention and cleanup. Sandbagging is the most common and effective way to prevent flood damage to your business, and with your policy, you will get reimbursed for the costs associated with taking part in this defensive measure. Another important aspect that would be covered in your policy is cleanup. Any work needed to clean and remove debris will also be reimbursed under your NFIP coverage.

If you have further questions about flood insurance coverage and its provisions, TriSure is here to help. Call 919.469.2473 to find out how you can extend your coverage to keep your business safe and running — no matter what happens.