Floods are the most common disaster in the United States so it is important to think about ways to prevent and respond to lost business after a flood. Every year flood damage hits one in four businesses with a typical commercial flood claim exceeding $87,000. Unfortunately about twenty-five percent of businesses never restart their operations in the wake of a flood or other natural disaster. Floods often arise from natural disasters such as hurricanes, tropical storms, severe spring thaws, and heavy rainfalls. But they also can occur from damaged pipes, nearby construction accidents, and clogged or overwhelmed drainage systems.
Your business could be at risk, so it is vital to think about both preventative and remedial methods to limit lost business income and property after a flood. Consider the following key measures and resources for your business in flooding incidents.
Floods can strike any business regardless of your location or your area’s past flooding history. However, you can determine the likelihood of flood risks by consulting flood hazard maps at Floodsmart.gov, the Federal Emergency Management Agency’s (FEMA) website for its National Flood Insurance Program (NFIP). These maps consider not only past flood history, but also statistical analysis of data on weather patterns, soil erosion, river-flow and tidal-surges, existing flood-control methods, topographical features, prior flood insurance claims, and construction and development projects. Depending upon your location, your business may be subject to a high, moderate to low or undetermined risk which will impact your flood preparedness actions and any flood insurance coverage options and rates.
Most businesses acquire standard property insurance to handle damages to their business facility and equipment which normally does not cover flood losses. If your business is located in a high-risk flood area, you are legally required to get flood insurance if your business holds a mortgage from a federally regulated or insured lender. Regardless of your risk, having appropriate flood insurance in place may determine whether you will be able to reopen your business after a flood. Participating NFIP communities adopt and enforce laws that either meet or exceed FEMA’s flood control mandates. If your business is located in an NFIP area, enter your name and address into FloodSmart.gov’s One-Step Flood Risk Profile to find your risk level, estimated NFIP premiums and contact information for NFIP insurance agents.
Flood and property insurance may help reimburse your losses for flood-damaged business equipment and facilities. These casualty policies normally do not cover lost income after a flood or other natural disaster. Business interruption insurance is another commercial insurance option for partial or full reimbursement of lost income and operational costs in the wake of a flood. Work with a licensed insurance agent to identify business interruption insurance that best suits your commercial needs and budget.
Your business should draft a business continuity plan for reducing disaster risks and restarting your business after a flood or other disaster. The federal government’s Ready.gov website provides information for businesses on identifying, avoiding and resolving risks from disasters. This site provides a free software download, “Business Continuity Planning Suite”, to guide your development of a business continuity plan. Part of your plan should address what steps you will take to repair and restore your flood-damaged business before you can continue your commercial operations. Water, electricity, plumbing, gas lines, and security systems may have been damaged or destroyed during a flooding incident so be prepared to consult with appropriate utility and service companies. A flood restoration company can also help you organize your continuation efforts, such as testing and repairing commercial equipment, cleaning and drying out flooded spaces, undertaking mold remediation, and properly disposing of damaged materials and hazardous waste.
Important state and federal government programs may be made available to your business if your flooding incident is part of a declared natural disaster area. On a federal level, nearly seventy kinds of disaster relief from seventeen different agencies offer flood-impacted businesses with financial, legal, medical, and employment assistance. DisasterAssistance.gov contains a “Find Assistance” questionnaire. Answer a few questions and this anonymous, online survey compiles a personalized list of federal and state disaster aid programs, including low interest loans, disaster unemployment insurance, and emergency capital resources. Similarly, a list of state disaster assistance programs can be found on the Small Business Administration’s website for your state’s disaster aid programs.
For declared natural disasters, IRS and state tax provisions may offer various forms of tax relief to flood-damaged businesses. Under these circumstances, your business may receive added time to file and pay your taxes, an opportunity to claim tax deductions of flood-related theft or losses, and quicker turnarounds on refunds. Disaster Resource Guide for Individuals and Businesses, published by the IRS, outlines recommendations for disaster-preparedness, worksheets on determining your flood-related losses, and methods to recreate any flood-damaged or destroyed tax records. You may wish to contact or visit a Taxpayer Assistance Center to review your flood-related tax issues with an IRS official. Call on your state’s taxing authority to find out what tax programs may aid your flood-impacted business.