With peak-hurricane season approaching, commercial property owners need to understand their water damage risk.
By Kevin Smith
According to the Insurance Information Institute, water is the biggest threat to a home. Approximately one in 50 homes has a property damage claim caused by water damage each year, resulting in an average insurance claim of $8,000. American Modern and Notion aim to help homeowners monitor for leaks and other events to better manage risk via Notion’s smart home platform. (Photo: iStock)
With severe flooding continuing to hit parts of the Midwest and Southeast, record-breaking amounts of water have been impacting the businesses and residents in this region. In fact, flooding along the Mississippi River is the longest-lasting since the “Great Flood” in 1927.
With hurricane season underway, concerns everywhere regarding flooding are not going away anytime soon. However, extreme weather is not the only reason for water damage, and even if you are not located in a flood zone, your property could still be vulnerable.
Given this, we have a few tips for commercial property owners to keep in mind when it comes to mitigating their risk.
Opt for flood insurance
Whether your business is large or small, located on the coast, a flood zone or in the middle of the state, we highly recommend investing in a certain level of flood insurance. In fact, more than 20% of flood claims are the result of damage occurring outside of high-risk flood zones, according to the Federal Emergency Management Agency. Every commercial property owner is susceptible to water damage to an extent — and at Graham, we’ve seen it firsthand.
Last summer, at a busy intersection in Center City Philadelphia, a 48-inch water main broke, releasing more than 15 million gallons of water and bringing a torrent of flooding to a neighborhood densely populated with office buildings, eateries and housing. While this was an unexpected severe flooding event, having a flooding policy in place was critical to recouping millions in losses for our client’s office tower.
Many surrounding buildings were not properly insured. For perspective, the expected annual economic losses from damage caused by hurricane winds and storm-related flooding will cost $9 billion for commercial businesses, according to the Congressional Budget Office. The cost for a policy is minimal compared to the potential risk, while providing the peace of mind that your property is well-protected for the unexpected.
Understand the policy and your risks
Once you decide to obtain flood insurance, it’s important to understand what exactly you’re signing up for. As a first step, taking a look at the policy’s sublimits, which set coverage limits for certain scenarios, and the deductible, which determines how much must be paid out-of-pocket before coverage kicks in, is imperative, so you know what to expect – and can budget accordingly, should damage occur.
At Graham Company, we utilize catastrophic modeling technology with 250+ years of weather data to calculate the probable maximum loss for a given property. The reason to do so, is that the insurance company is going to price the coverage based off this perceived exposure.
The data showing true risk exposure, coupled with other primary and secondary factors regarding the building’s design and structure will help significantly when negotiating pricing with insurance carriers. This is more important than ever in the current market, where many property owners with catastrophe-exposed properties are facing considerable increases in insurance costs at renewal.
Take immediate action
It’s important to establish relationships with key remediation and recovery vendors in advance of any flooding, so a simple phone call is all that is needed. Given that it isn’t necessary to wait for insurance adjusters and restoration companies to evaluate the property in person, remediation and restoration companies can come to the scene immediately for essential repairs and emergency cleaning.
These vendors can also work with contractors to begin estimating the extent of the needed repairs. Taking quick and decisive action such as removing water and drying out any affected areas can greatly lessen the potential impact of further deterioration.
We also recommend partnering with your insurance broker that has the knowledge to ensure potential risks for your property are identified and proper flood coverage is in place for those exposures. Should an unfortunate flooding incident occur, your broker can be a critical resource in navigating the claims process.
Kevin Smith is managing director at Graham Company. He can be reached at firstname.lastname@example.org.