Posted on May 17, 2014
With growing drought conditions throughout the southwest, each year the State of Arizona is experiencing longer wildfire seasons than the usual June through September period. Because these wildfires are destroying more acres and property than ever before, it is important for Arizona business owners to properly assess their risk area to best determine if wildfire insurance is truly necessary.
Planning and preparing for disaster will allow companies to fully evaluate their business insurance needs and purchase the coverage that will provide full protection. The first step in being prepared is to review current commercial insurance policies. Many times business owners know they have coverage but are not aware of the policy limits. If a company is underinsured and experiences a wildfire damage claim, the owner will have to pay out of pocket to cover the difference in damages. Property damage can result in significant financial loss with the potential to completely wipe out business savings.
Companies will want to make sure that the right type of coverage is in place as well. Wildfire is usually included on commercial property policies; however, some insurers require it be added as a special peril endorsement. What businesses might also not consider is that wildfires destroy large amounts of vegetation and forests. With the loss of landscape plants and vegetation, the risk of flooding after wildfire damage is greater due to the fact that burned areas will not absorb water effectively. That means business owners must purchase flood insurance ahead of time to fully protect their assets and property.
Flood insurance is sold as a separate policy through the National Flood Insurance Program (NFIP) in coverage amounts up to $500,000 for structures and $500,000 for business personal property. Because there is a 30 day waiting period until flood policies go into effect, the time to purchase flood insurance is well ahead of the event.
For existing commercial insurance policies that include wildfire coverage, make sure to evaluate the coverage every year so that changes in property value are up to date and the right policy amounts are available. Regular reviews are the only way to ensure that the appropriate business insurance coverage is in place.