Flood Insurance Coverage: Always Be Prepared for Rainy Days

Over the last few decades, major floods have wreaked havoc on the country, causing considerable repercussions to properties, road systems, and agricultural land and crops. According to the Malaysian Department of Statistics, the floods that occurred in 2021 caused major damages of a whopping RM6.1 billion to the impacted states such as Selangor, Kelantan, Terengganu and Pahang*.

As 9% of Malaysia's land is considered as flood-proned areas, it is critical that SMEs take appropriate measures to safeguard their enterprises from floods. This then poses several questions, such as ‘'Do businesses need flood insurance coverage?’' and ‘'What happens if a business premise is not covered for floods?’'.

For concerned SME owners, we’re here to walk you through the fundamentals and the significance of protecting your commercial properties with flood insurance coverage. Without further ado, let’s jump right in!

What is flood insurance?

To put it simply, flood insurance is a type of property insurance that protects the property against damages caused by floods due to various factors. For instance, severe or persistent rain, monsoon flow factors, coastal storm surges, rapid urbanisation, clogged storm drainage systems, or levee failure.

A heavy flood is regarded as a catastrophic event, and the damage or destruction it causes is not covered unless you have extra insurance. Despite its devastating impacts, the level of insurance penetration remains low.

In 2019, it was reported that more than 80% of businesses are vulnerable to disaster as only 15% of small and medium enterprises (SMEs) are covered by flood insurance**. 

How flood insurance works

Similar to other insurance products, flood insurance is designed to act as a flood relief programme. It delivers alternative financial assistance to those struggling with the challenges of flooding, mainly to reduce the hefty costs of expenses and cover losses.

Locally, flood insurance is not available as an independent takaful or insurance policy. Instead, it is currently offered as an add-on to comprehensive and basic insurance policies for an extra contribution or premium. Check your insurance coverage or speak with your insurance representatives on flood coverage to mitigate your flood risk.

But what if your business is not protected at all, you ask?  

The significance of business insurance

Covering your business with insurance is tremendously critical in ensuring emergency preparedness, especially since emergencies such as flooding has become more prevalent in recent years. What other risks are covered? Property damages, fire, theft and even equipment breakdown to name a few. Here are some essential reasons why you must get insurance for your business: 

1. To ensure your cash flow will not be interrupted 

2. To build business credibility

3. To protect your business and employees against risk

This article is brought to you by CIMB as part of our ongoing efforts to raise the level of financial literacy among Malaysians. Financial knowledge and understanding are key to making well-informed and meaningful financial decisions towards positively improving welfare and well-being of communities. This is one of our many efforts to achieve CIMB’s purpose of advancing customers and society.

Source:

*https://www.nst.com.my/opinion/columnists/2022/03/777019/why-flood-insurance-coverage-so-important-now

**https://www.smecorp.gov.my/index.php/my/news/3709-changing-flood-risks-for-urban-sme-communities