When Lightning Strikes: How Business Can Protect Its Bottom Line

Fires resulting from lightning strikes cause 3 to 5 percent of all U.S. commercial property insurance claims, accounting cumulatively for more than $2 billion annually in covered payouts to small and medium-sized businesses (SMBs), according to the Insurance Information Institute (Triple-I) and the Lightning Protection Institute (LPI).

“Beyond the fire is the destruction of electrical wires and infrastructure that supports everything we do to communicate and to conduct business,” explained Tim Harger, executive director, LPI, who gave an example of a furniture manufacturer on the East Coast whose property was struck by lightning, causing over $1 million in insured property damage.

“Yes, there was the typical fire that caused structural damage, but what was impacted on the inside was even more costly – damaged inventory, production down time, loss of revenue during repairs,” Harger said. “The investment in a lightning protection system would have saved this business owner – and his insurance company – the million dollars and he could have avoided the business interruption.”

National Small Business Week (April 30-May 6, 2023) is a good time to highlight the importance of properly designed, installed, inspected, and certified lightning protection and grounding systems that can mitigate this risk to SMBs. The system’s installation should be accompanied by the business’s purchase of the right types and amounts of insurance, Triple-I and LPI agree.

According to the U.S. Small Business Administration (SBA), 40 percent of small businesses nationwide do not reopen following a natural disaster, and another 25 percent fail within a year.

“Insurance allows businesses to recover economically from a lightning strike,” said Sean Kevelighan, CEO, Triple-I. “Yet commercial policyholders also should take advantage of tools that help predict and prevent losses from occurring.”

Triple-I and LPI offer these four steps to protecting a commercial property from damage caused by a lightning strike:

1. Install a certified lightning protection system—These systems provide a specified path to harness and safely ground the super-charged current of a lightning bolt. Because every building is unique, building owners should take risk factors into consideration, including location, frequency of thunderstorms, and impact to their businesses such as loss of services and revenue. Properly installed lightning protection systems include utilizing a certified lightning protection contractor and a third-party inspection program.
2. Secure surge protection—Proper selection and installation of surge protection devices can protect electrical and electronic equipment from lightning and other surges that can enter a building through the electric, telephone, data, or other wires from outside. Surge protection alone does not protect against the damage of a direct lightning strike. Installing a complete lightning protection system which includes surge suppression will protect a business from the impact of lightning.
3. Purchase Property Insurance—Pays to repair or replace stolen, lost, or damaged business property. It covers your business’s structure and other assets on its premises, like equipment.
4. Consider Business Income (Interruption) (BI) Coverage–If your business is forced to close temporarily due to direct physical damage to your property from a covered cause of loss, such as a fire or a windstorm, business income (interruption) insurance can help you replace lost net income during the period of restoration and pay for continuing normal operating expenses, including payroll, relocation costs, and advertising if you set up shop at a temporary site. Also consider utility services interruption coverage as an endorsement which covers your business in the event there is a disruption in electric, gas or water service.

“Business owners, by their very nature, are risk takers. That’s how they became so successful. But smart entrepreneurs also recognize insurance and risk mitigation are essential elements to an overall business plan,” said Kevelighan.

RELATED LINKS:

ADDITIONAL RESOURCES:

Insurance Institute for Business & Home Safety

U.S. Small Business Administration

About the Insurance Information Institute

With more than 50 insurance company members — including regional, super-regional, national, and global carriers — the Insurance Information Institute (Triple-I) is the #1 online source for insurance information in the U.S. The organization’s website, blog and social media channels offer a wealth of data-driven research studies, white papers, videos, articles, infographics and other resources solely dedicated to explaining insurance and enhancing knowledge.

Unlike other sources, Triple-I’s sole focus is creating and disseminating information to empower consumers. It neither lobbies nor sells insurance. Triple-I offers objective, fact-based information about insurance – information that is rooted in economic and actuarial soundness. Triple-I is affiliated with The Institutes Risk and Insurance Knowledge Group.

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“Insurance allows businesses to recover economically from a lightning strike. Yet, commercial policyholders also should take advantage of tools that help predict and prevent losses from occurring."