Wildfire season will soon be upon us once again.
The years 2020 and 2021 were particularly devastating wildfire seasons, with millions of acres lost across the western United States. In California alone, more than 4.2 million acres burned in 2020 and 2021, causing an estimated $14 billion in insured losses.
Increasing wildfire activity and losses are expected to continue due to climate change, population growth in wildfire-prone areas, and aging power grids that can cause wildfires.
It is, in other words, essential for commercial insurance buyers to understand their wildfire coverage options. In this article, we'll explore the key factors businesses should consider when selecting wildfire coverage for their insurance policy.
Understanding the Risks
The risk of wildfires varies depending on the location of your business. Areas with a history of wildfires are at higher risk of future wildfires, of course, and businesses in these areas may face higher insurance premiums. The western United States is particularly vulnerable due to its dry climate, strong winds, and extensive forested areas.
Wildfire Coverage Options
Commercial insurance policies typically include coverage for property damage and business interruption caused by wildfires. However, it's essential to review the policy carefully to understand the specific coverage and any exclusions. In addition to property and business interruption coverage, some policies may also include coverage for extra expenses incurred due to the wildfire, such as temporary relocation costs or costs associated with preventing damage to the property.
Insurance companies may require businesses in high-risk areas to take certain steps to mitigate the risk of wildfires. This could include installing fire-resistant building materials, maintaining a defensible space around the property, and having a plan in place for evacuating employees and customers in the event of a wildfire.
Some insurance companies offer additional wildfire-related services to their commercial policyholders. These services can include access to a network of professional firefighting teams, pre-loss wildfire mitigation assessments, and post-loss wildfire recovery services. These additional services can help businesses reduce their risk of property damage and business interruption caused by wildfires.
Cost of Wildfire Coverage
The cost of wildfire coverage for commercial insurance policies can vary widely depending on several factors, including the location of the business, the value of the insured property, and the specific coverage options included in the policy. While the cost of wildfire coverage may be a concern for businesses, it's important to remember that the financial impact of a wildfire event can be significant. Without adequate coverage, businesses may be forced to cover the costs of property damage, business interruption, and other expenses out of pocket.
In conclusion, businesses located in areas with a high risk of wildfires should take steps to mitigate their risk and ensure they have adequate insurance coverage. By working with an experienced insurance agent and reviewing and updating their coverage regularly, businesses can be better prepared for the financial impact of a wildfire event.
The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the U.S. An employee-owned organization, we’ve been providing our clients with the confidence to face whatever lies ahead for more than 100 years. For more information, contact us online or call 877-440-3304.
This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.