Chris Rhodes is the chief insurance officer at NEXT.

Between January and September 2023, the U.S. suffered 23 weather disasters up to that point that year, with each catastrophe creating a staggering $1 billion in damages. In the first few months of 2024 alone, heavy rains, flooding and freezing temperatures impacted much of the U.S. As we head into spring and summer, we’re seeing increased power outages due to heatwaves and threats of wildfires and hurricanes, placing increasing strain on the electrical grid.

To put it in perspective, from 2011 to 2021, 90% of U.S. counties experienced a weather disaster, and without the right coverage, your business could be vulnerable. As entrepreneurs think about starting a business, the potential of a natural catastrophe impacting operations isn’t top of mind for most. However, as weather disasters wreak havoc on businesses of all kinds, it warrants a newfound focus as entrepreneurs assess potential risks in their physical footprint and business strategy.

Our company’s recent survey points to the alarming fact that 90% of business owners weren’t sure if they had adequate insurance coverage, and even more concerning, 29% cited they had no business insurance at all. While there are preventative steps you can take to mitigate the risks of extreme weather on your business, like insulating your pipes to prevent freezing or reinforcing windows and doors and clearing gutters and drains—no business is 100% immune to weather-related disasters. In light of the escalating frequency and severity of such events, small and medium-sized businesses (SMBs) must evaluate and adapt their coverage plans.

Conduct A Comprehensive Risk Assessment Of Your Business

When starting a business or evaluating your insurance needs after a difficult winter, it’s incredibly important to be aware of the potential risks and impacts that extreme weather can have on your business. While it’s hard to know when an extreme weather event will impact you, conducting a comprehensive risk assessment is a great way to evaluate your business from all sides.

First, you’ll need to look at the geographical location of your businesses and their proximity to high-risk areas—e.g., are you in an area that is at a high risk of flooding, or do you live in an area that is at high risk for wildfires? By understanding what your potential risks are upfront, you’ll be able to develop a stronger risk management strategy, including determining how to avoid or control your risk (for example—setting up a leak detector system and conducting regular building maintenance to decrease the severity of any damage related to weather, or installing fire-resistant roofing), budgeting for a contingency plan should an incident occur or sharing the risk by bolstering your insurance coverage.

After you’ve assessed your risk profile, you’ll want to take that information and evaluate it against the insurance policies you currently have. If you’re in an area that is typically hit hard with summer thunderstorms and flooding, you likely aren’t protected under your current business insurance policy. If you’re in a high-risk zone, consider additional coverage like dedicated flood insurance, for example.

Don’t Assume That Your Policy Will Cover Every Potential Risk

One of the most dangerous things a small-business owner can do is to assume that their commercial property insurance policy will cover any/all the damage that occurs. Carefully read your policy to understand what is covered and what is not. Pay attention to deductibles, exclusions and coverage limits. If you’re still unsure, consider consulting with an insurance agent to clarify any doubts. When evaluating your policies, you can consider working with a digital insurance provider as an option. By taking a technology-first approach, digital insurers can leverage data and analytics to evaluate your business and create customized insurance packages tailored to your specific needs—moving away from a one-size-fits-all policy.

Have An Emergency Kit Ready

While you should have an actual emergency kit on hand—including flashlights, extra batteries and first-aid supplies, it’s important to have an emergency database as well. In times of emergency, things are already high stress as it is. Having all of your important documents and necessary phone numbers for your insurance company (better yet, if you can handle any claims online) or property manager will only help to alleviate any anxiety. If you have employees, make sure your roster is up to date with contact information and consider developing a communication plan in case of emergencies. Finally, create a business continuity plan that breaks down the most critical business processes and how to keep them running smoothly when something goes wrong.

When starting your business, you want to focus on the exciting milestones such as opening your first location or making your first sale. You don’t want to have to dwell on what might happen if a flash flood or wildfire closes operations. Taking the steps to prepare your business in advance, and working with an insurance provider you trust, will only help reduce stress in the event of an emergency.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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