If your small business is located near open water, you’ve probably noticed that insurance premiums can be steeper than for inland businesses. You’re not imagining things—there are several solid reasons why operating in these picturesque yet risky locations can inflate your insurance costs.
1. Increased Risk of Natural Disasters
Waterfront areas are magnets for natural disasters like hurricanes, floods, and storm surges. For example, coastal states like Florida, Louisiana, and Texas are frequently pummeled by hurricanes. Hurricane Ian alone in 2022 caused over $113 billion in damages across the U.S. Insurers see these areas as high-risk zones, meaning they expect to pay out more claims, and unfortunately, they pass that cost on to you.
For perspective, the National Flood Insurance Program reports that 90% of all natural disasters in the U.S. involve flooding. If your business is located near water, flood insurance is often a must, and that’s an added expense.
2. Higher Property Values
Let’s face it—waterfront property is prime real estate. Whether it’s a small marina, a charming beachside café, or a fishing supply shop, the land is often worth more than properties located inland. Higher property values mean higher replacement costs in case of a disaster, which directly influences your insurance premium.
For instance, rebuilding costs after Hurricane Harvey reached approximately $125 per square foot in some areas of Texas. Insurers bake these higher rebuild costs into your premiums.
3. Liability Risks
Water-based activities can attract more accidents and lawsuits. If you’re running a business where people rent kayaks, fish, or even just enjoy a seaside view, you’re at a higher risk of injury claims. Drowning accidents alone cost U.S. businesses millions annually.
Plus, salty, humid air can accelerate the wear and tear on your building, equipment, and vehicles, leading to more frequent claims for repairs or replacements.
4. Stringent Regulations
Coastal businesses often face more regulations to protect the environment. For example, spill prevention laws or waste management requirements can increase your operational risks and costs. Insurers see these as additional factors that might lead to compliance-related claims or lawsuits, raising your liability coverage premiums.
Is the Expense Worth It?
Despite higher insurance costs, operating near water can also be lucrative. Coastal businesses often see increased foot traffic, premium pricing opportunities, and loyal customer bases. The key is to manage your risks effectively while finding an insurance provider who understands your unique needs.
At USA Business Insurance, we specialize in affordable, tailored coverage for businesses across the U.S., including coastal locations.
Let us help you protect your business so you can focus on what you do best. Give us a call today for a free quote.
