Flood Risk and Choice of Business Location

In the business world they say that location is everything. When you’re opening some sort of commercial enterprise that relies on heavy foot traffic you need to place your business in an area most likely to provide it. But when it comes to location, there are other factors that have to be considered. One of them is the potential for flood. Since a flood could completely wipe out a business it should be a consideration whenever you’re seeking new property to locate your company.

High Risk versus Low Risk

The federal government classifies flood risk at three levels: high, moderate, and low. Obviously a high risk area has the greatest potential to see regular flooding. It’s also an area in which business owners will pay more for their flood insurance. According to the National Flood Insurance Program (NFIP) businesses located in moderate and low risk areas are eligible for preferred policies at lower prices. Those in high risk areas cannot get preferred policies.

When you’re assessing whether to locate in a high risk area you need to consider the cost of the insurance policy plus whether or not you will generate sufficient income to make it worth your while. As an example, consumer electronics are one of the hottest categories in today’s retail market. If you had the opportunity to open an electronics store in a high risk area that had the potential of raking in at least $1 million in annual sales, it might be well worth your while to pay for a high risk flood insurance policy in order to locate there. By comparison, if you find a low risk area with drastically lower traffic volume, you may not generate enough business to warrant placing your store in that location, regardless of the cost of flood insurance.

Shopping Around

Once you decide on a location for your business you need to shop around for the best insurance possible. That’s true for both your liability and flood insurance. You should contact at least several different companies or local agents in order to get multiple quotes you can look over. If you’re a savvy negotiator you can even use these quotes to force insurance companies to compete for your business. If you don’t want to take the time to comparatively shop you’re probably going to end up spending more than you need to.

Whatever insurance policy you settle for in the end needs to be adequate in terms of protecting you against most disasters. When it comes to flood insurance you’re going to have to decide if you’ll purchase both building and contents or just contents alone. And if you’re renting your space rather than owning it, you might want to check your lease. Sometimes landlords require tenants to carry building coverage as part of their flood policies.

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