Flood insurance can help a business recover from catastrophe
The nation watched in horror in 2005 when Hurricane Katrina caused floods that destroyed the homes and all the personal possessions of tens of thousands of residents and business owners in the Gulf Coast states. One of the biggest ironies of that disaster is that some parts of New Orleans were not in federally designated flood zones, and about 100,000 people there were not required to buy flood insurance.
If there is one lesson to take away from that horrific hurricane, it is this: flood insurance can help a business owner recover from nature’s fury and help prevent financial ruin. So it’s a good idea to consider such insurance, even if you’re not required to buy it.
Hurricanes like Katrina are rare. Many uninsured businesses sustain flood damage from much more common occurrences such as localized or widespread flooding from rivers and streams, or accumulation of surface water after heavy rains. The damage can still add up to thousands of dollars.
Here are a few facts you might not be aware of about floods and flood insurance:
• Flood losses are not covered by homeowner’s or renter’s insurance. If you want flood insurance for your home and/or possessions, you have to purchase it separately.
• Flash floods can cause walls of water 10 to 20 feet high, but as little as one inch of water can still cause costly damage to your property.
• If your area is stricken by floods, the federal government will not provide disaster assistance unless the President formally declares a disaster (less than 10 percent of all weather emergencies in the United States are declared a disaster). If that does not happen, you’ll have to shoulder the massive damage costs alone.
• If the President declares your area a disaster, government assistance is often in the form of a loan that you have to pay back with interest, in addition to the mortgage loan you still owe on the damaged property. Flood insurance, however, compensates you for most of the property loss caused by a flood, even if a disaster is not declared, and you do not have to repay the funds.
• Flood insurance is available to those who live in the 20,000 communities, including Vancouver and Clark County, that participate in the NFIP.
• The Federal Emergency Management Agency (FEMA) sets the rates, coverage limits and deductible options for flood insurance policies, which are sold at the same price by insurance companies and agents. Those who live in low-risk areas can purchase the insurance at a discount.
• In general, a flood insurance policy does not take effect until 30 days after it is purchased. If the weather forecast announces a flood alert for tomorrow or next week and you haven’t yet purchased coverage, it’s probably too late.
Even if you have no outstanding business loans or have paid off your mortgage, a flood is like a fire: both can destroy your property. You purchase insurance in case of fire, so why not purchase insurance in case of flood?
The biggest mistake I see is that people don’t buy flood insurance even though they are eligible for it. The second biggest mistake is that those who buy flood insurance strictly for their commercial building or house often fail to insure the contents.
The NFIP has an excellent Web site that has much more information on this topic. Located at www.floodsmart.gov, this site enables you to access the list of communities participating in the program and you can even assess the level of flood risk at your individual address.
Don’t wait for the storm clouds to start gathering before taking steps to ensure your financial future. Talk to your banker, mortgage lender or insurance agent today about your options.
Based in Vancouver, Tawnie Nelson manages Business Banking for Wells Fargo in southwest Washington. She can be reached at 360-759-4820 or Tawnie.Nelson@wellsfargo.com.