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4/18/2013 - Three things business owners can do to prepare for flood season

Business owners should think long and hard about securing flood insurance.

While most business owners are generally aware that their companies face the potential of being devastated by a severe storm, they may not have the coverage they need to recover quickly in its aftermath.

That was the case for a substantial number of entrepreneurs following Hurricane Sandy. According to the Insurance Information Institute, almost 40% of small businesses close their doors permanently after a disaster like Sandy strikes. And as III vice president Loretta Worters points out, much of the closures are often due to the high water levels experienced, as the costs to repair many times outweigh the losses involved with closing.

"Ninety percent of all natural disasters involve flooding," said Worters. "From 2007 to 2011, the average commercial flood claim was over $75,000; a substantial amount of money for a business to have to come up with on their own."

A potential explanation for why business owners weren't prepared for Sandy may have something to do with their thinking they had coverage already. In a recent poll conducted by FTI Consulting, approximately half of all Americans think that their property insurance plan has flood protection, but only 15% indicated they knew for sure, having purchased through the National Flood Insurance Program.

With this in mind, the III offers business owners with some tips to be aware of this flood season.

1. Determine flood risk. For example, though business owners should always have flood protection, they have an increased risk of experiencing a flood if they're in a flood zone. Entrepreneurs can get an idea of whether they are in a flood zone by talking with their local governmental leaders.

2. Flood damage included under most comprehensive policies. Flood coverage generally provides for the physical structure of a place of business, but company managers may also want to consider protection for their vehicles. The III notes that entrepreneurs are usually safeguarded from high water levels if they have comprehensive auto insurance, which is an optional policy.

3. Buy a plan as soon as possible. Finally, if business owners do not have coverage, don't put off buying it. There's usually a 30-day waiting period for flood insurance to go into effect, meaning that if a business purchases a plan and there's a major storm within a month of buying coverage, they won't be protected.

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