Key takeaways
- Extreme weather events and rising claim costs have prompted insurers to enforce stricter water mitigation requirements.
- Insurers assess water mitigation strategies, property location and construction quality when determining coverage and premiums.
- Businesses that invest in water risk assessments and smart technologies can often negotiate lower premiums and better policy terms.
- Effective water mitigation includes preventative maintenance and integration into a broader business continuity plan.
Water damage can disrupt operations faster than most businesses anticipate. For commercial property owners, proactive water risk mitigation is essential to prevent costly damage and maintain insurance coverage. Extreme weather events are increasing, and insurers face mounting losses. As a result, underwriters are tightening coverage requirements. Today, securing favorable insurance rates often depends on demonstrating an effective water risk management program – helping businesses protect assets and reduce premiums.
“By prioritizing water mitigation efforts, organizations stand to gain more than just protection against costly damages. These measures can help safeguard operations from downtime and could allow for long-term savings in the form of better policy terms,” says Matt Kistner, Insurance Sales Executive Senior at Huntington Insurance, Inc.
A strategic water risk mitigation plan helps businesses reduce insurance premiums and protect commercial property from costly water damage. Leveraging IoT water detection systems and thorough risk assessments can significantly lower exposure.
Commercial property water damage risks and how to prevent them
Commercial property owners often overlook water damage prevention amid other priorities like retrofits and rising vacancy rates. Yet water risk mitigation strategies are critical to avoid costly repairs and insurance exclusions. Water damage is now one of the top causes of commercial property losses1. Beyond repair costs, neglecting water issues can also jeopardize insurance eligibility.
Common risk areas include:
- Plumbing and utility pipes: Leaks or burst pipes from HVAC systems, fire sprinklers, sinks and toilets.
- Rainwater and stormwater: Flooding from rivers, coastal storms or flash floods; groundwater seepage into basements.
- Sheet flow: Water pooling on parking lots or low-slope roofs without proper drainage.
The rise of extreme weather events is exacerbating risk from these areas. In the past decade from 2015-2024, National Oceanic and Atmospheric Administration (NOAA) data shows the U.S. experienced 19 flooding events and 103 severe storms that contributed to more than $1.4 trillion in economic losses2. By comparison, the prior decade saw less than half as many severe weather events2. This sharp increase in both frequency and severity has led to unexpectedly high losses for insurance carriers, who are in turn passing those costs on to their customers.
Impact of water risk on commercial property insurance premiums
Water mitigation is a serious issue from an insurance perspective, so underwriters are adding new layers to their water mitigation stipulations for coverage. For example, many carriers require companies to have water detection sensors or similar mitigation technologies in place before they’ll even consider covering the building under a policy. Some insurers may also require the use of formal water mitigation plans or smart detection technologies, such as IoT-enabled sensors, as a condition of providing coverage, particularly for builder’s risk insurance policies on large or high-value construction projects. While not a universal mandate across all insurers or project types, the trend is growing due to the high cost and frequency of water damage claims during construction.
A property’s location relative to floodplains or bodies of water can also impact a policy’s terms and premiums. Insurers use flood zone maps to model risk and set coverage terms. These models consider how those areas might expand and impact the properties they’re assessing, which can heavily affect coverage.
The construction and age of the commercial property itself is also factored into this assessment. Though new building techniques meet specific requirements to mitigate water, older buildings might not have the right connective material to withstand water accumulation pressure. If water could put the structural integrity of a building at risk, a carrier might require property owners to add bracing and additional repairs before issuing coverage.
High-risk properties may face steep premiums, restrictive terms or even water damage exclusions, leaving owners to absorb repair costs. From that standpoint, unmitigated water risk carries considerable financial risk. Investing in a thorough water risk assessment could help address problem areas proactively, not to mention demonstrate a commitment to risk management that could be valuable in insurance negotiations.
Step-by-step water risk assessment for commercial properties
A proactive risk assessment is not just about identifying potential risks. Companies can use it to create a detailed plan that includes mitigation, preventative maintenance, and long-term resistance. Underwriters can use this information as supplemental evidence when determining insurance policy terms.
Start with a water risk assessment
Inspect roofs, walls, foundations and drainage systems for vulnerabilities. This step is essential for commercial property water damage prevention and can help reduce insurance premiums. Key risk factors include:
- Roof age
- Standing water
- Blocked exterior drain lines
- Foundational weaknesses
Working with an experienced third-party can help identify areas most likely to cause problems or draw attention from underwriters during insurance evaluations.
Know your flood risk
Properties in floodplains or high-risk zones need stronger water mitigation strategies, such as sump pumps and flood barriers. While these may be costly, they will likely reduce the likelihood of significant damage and could improve insurance standing.
Document your findings
A detailed water risk assessment helps guide mitigation efforts and supports insurance negotiations.
Water mitigation technologies to protect your commercial property
Now that vulnerable areas have been identified, it’s time to deploy sensors, detection technologies and mitigation equipment to address them. Examples include:
- IoT-enabled water detection systems
- Automated shutoff valves
- Sump pumps and puck sensors
Advanced systems now offer real-time monitoring and alerts via mobile apps. Companies can capitalize on these innovations by investing in Bluetooth- or Wi-Fi-enabled solutions that track water flow, humidity and pressure in real time. Property owners receive alerts on abnormal patterns, allowing them to troubleshoot issues before they escalate. With water damage being a major driver of commercial insurance claims, many insurance carriers provide water sensor and leak-detection programs for their clients. Property owners should check with their insurer to determine whether these technologies are available as part of their coverage or eligible for risk-mitigation incentives.
Placing sensors in low areas to send water detection alerts is a good first step, but what happens when one stops working? Regular maintenance is critical: inspect IoT water sensors and shutoff valves to ensure they work when you need them most. A preventative maintenance program helps make sure the systems designed to protect your property won’t fail when you need them most.
Preventing water damage should not be a standalone business process. Responding to these events should be a component of a business continuity plan. “In the event of a disaster, clearly defined roles and responsibilities ensure a fast response, minimizes downtime, and business interruption. Taking a holistic approach – integrating technology, risk assessment, and continuity planning – better positions you for disasters and demonstrates to insurers that you’re prepared for water-related risks,” says Michelle Szymanski, Insurance Sales Executive Senior at Huntington Insurance, Inc.
Future-proof your business: Why water risk mitigation matters
Extreme weather events and significant losses have driven insurance carriers to put pressure on businesses’ proactive water risk practices. By conducting risk assessments, implementing mitigation technologies and practicing an incident response plan, organizations do more than just comply with insurance best practices – they position themselves for the future.
With risk management strategies in place, commercial property owners can help protect their assets and set themselves up for more favorable insurance terms.
Partner with Huntington Insurance, Inc. to create a tailored commercial property insurance plan that strengthens your water risk strategy and lowers costs. Learn more today.
