How to Reduce Lightning-Related Business Risks

Lightning causes significant fire risk to small and medium-sized enterprises (SMEs), resulting in annual damages of several billion dollars, according to the Insurance Information Institute (Triple-I) and the Lightning Protection Institute (LPI).

The Small Business Administration (SBA) reports that 40% of small businesses do not reopen after a disaster, 25% close within a year, and over 90% shut down within two years.

Sean Kevelighan, CEO of Triple-I, noted that larger commercial businesses often manage risks more effectively by employing onsite professionals to identify and control potential threats.

These figures underscore the financial strain that events such as lightning strikes impose on SMEs. National Small Business Week emphasizes the need for professionally installed, inspected, and certified lightning protection and grounding systems, along with adequate insurance coverage.

Kevelighan emphasized that although insurance and protection measures may appear costly for businesses with limited budgets, they significantly improve recovery speed and survival rates.

Larger commercial businesses have been ahead of the curve in terms of predicting and preventing risk. They often have an onsite risk manager to identify, assess and manage potential risks that could negatively impact the business.

Sean Kevelighan, Triple-I CEO

“While larger commercial businesses tend to be more informed on the benefits of insurance as well as predicting and preventing risk, oftentimes smaller and mid-sized businesses simply do not have the resources, and ironically, they are most at risk when disaster strikes,” Kevelighan added.

“As much as purchasing insurance and taking steps to mitigate risk may seem like an added cost when budgeting is tight, the reality is they will recover faster and have a greater chance of staying in business.”

5 Key Lightning Protection Strategies

Protecting a small business from lightning involves five key strategies:

1. Certified lightning protection systems
2. Surge protection
3. Business property insurance
4. Business income and extra expense insurance
5. Utility services endorsement

Certified lightning protection systems

Installing a certified lightning protection system (LPS) is one of the most effective ways to safeguard a business from the direct physical impacts of lightning, according to Lightning-Caused U.S. Homeowners Insurance report.

The systems provide a controlled path for electrical discharge to safely reach the ground, preventing uncontrolled surges that can ignite fires, destroy infrastructure, or injure occupants.

These systems create a safe path for lightning current to travel to the ground. System design should consider building location, local thunderstorm frequency, soil conditions, and building use.

For insurers, recommending certified systems helps reduce claims related to fire, equipment damage, and loss of business continuity. Insured properties equipped with professionally designed and installed LPS tend to suffer fewer severe losses, which can lead to more predictable underwriting results and reduced loss ratios.

For business owners, the system design must consider specific variables to be effective. Key factors include geographic location and the frequency of local thunderstorms—some areas in the U.S. experience significantly higher lightning strike density than others.

Soil conductivity also plays a role, as it affects how efficiently the electrical charge can dissipate into the earth. The building’s use and occupancy must be factored in to prioritize protection zones—warehouses, offices, and production areas may each have different exposure levels and tolerances.

Installation must follow recognized national safety standards, such as those outlined in NFPA 780.

Certification ensures that the system has undergone proper inspection and meets all applicable requirements. It’s important that these systems are regularly inspected and maintained, especially after any significant strike event or structural change.

Insurance companies can encourage policyholders to invest in LPS by offering premium credits or discounts. For businesses, the upfront cost is outweighed by the long-term benefit of reducing potential fire damage, operational downtime, and financial loss. A certified system protects not just physical infrastructure, but the continuity of operations and customer trust.

Surge protection

Surge protection is a main component of any lightning risk mitigation strategy. While a lightning protection system addresses direct strikes, surge protection devices (SPDs) safeguard internal systems from indirect strikes and transient voltage surges.

Correctly selected and installed surge protection devices help shield electronic equipment from lightning-related electrical surges entering through utility lines or external wiring.

These can travel through electrical, telephone, internet, and data lines, affecting systems even if the lightning strike occurs hundreds of meters away.

For insurers, electrical surges caused by lightning are a frequent source of claims related to damaged electronics, data loss, and system failure. Encouraging the use of SPDs, especially in high-exposure regions, can help reduce the frequency and severity of such claims.

For SMEs, installing SPDs helps protect sensitive equipment such as computers, point-of-sale systems, HVAC controls, industrial machinery, and security systems.

Damage to these assets can halt operations and lead to expensive repairs or replacements. In some industries—such as healthcare, logistics, and manufacturing—loss of function due to electronic failure can have immediate and wide-reaching consequences.

An effective surge protection strategy involves more than plugging in a power strip. It should include service entrance protection (at the main electrical panel), branch panel protection, and point-of-use protection.

The multi-layered approach ensures that surges are mitigated at every stage of the electrical infrastructure. Coordination between these layers is necessary to avoid overvoltage at any point in the system.

SPDs should meet standards set by organizations like UL (Underwriters Laboratories) or IEEE (Institute of Electrical and Electronics Engineers).

Regular testing and replacement after a surge event are also important, as these devices wear out over time.

Businesses that integrate SPDs into their risk management plans improve their resilience and operational continuity. Insurance companies benefit from fewer claims and can use surge protection as a metric for pricing policies or offering coverage enhancements.

Business property insurance

Business property insurance protects physical assets critical to daily operations. In the context of lightning risk, this type of insurance becomes essential for covering damage caused by fire, electrical failure, and equipment loss following a strike.

Coverage typically includes buildings, fixtures, equipment, inventory, and furnishings.

This covers repairs or replacement of physical assets such as buildings, equipment, inventory, furniture, and fixtures essential for daily operations.

For insurance providers, clearly defining lightning-related perils within the policy helps ensure that claims are handled efficiently and minimizes disputes. Many lightning-related claims involve fire damage or the destruction of high-value electronics and machinery.

Accurate policy language that accounts for the full scope of lightning-related loss can reduce claim processing times and litigation risk (see TOP 100 P&C Insurance Companies in the U.S.).

For SMEs, this insurance provides the foundation of recovery. Structural repairs can cost tens or hundreds of thousands of dollars, depending on the building’s size and function.

Replacing production equipment, computer systems, or inventory may not be possible without insurance coverage, especially for businesses operating on narrow margins.

Business property insurance should be evaluated regularly to ensure it reflects current asset values. Underinsurance is a common problem—businesses that fail to update their policies may find their coverage inadequate when a loss occurs.

In addition, policyholders should understand any exclusions related to lightning or power surges and consider endorsements that close these gaps.

Proper documentation, including asset inventories, photos, and purchase records, can expedite claims. Insurance agents can help SMEs conduct annual risk assessments and recommend adjustments in coverage to match operational changes.

In regions with high lightning activity, insurers may consider offering property policies that specifically address these risks or offer bundled coverage with other weather-related events.

Encouraging risk-reduction measures, such as installing certified LPS and SPDs, can also justify lower premiums or better policy terms.

Business income and extra expense insurance

Provides support when operations temporarily stop due to a covered event, such as a fire caused by lightning. This coverage includes lost income, rent, payroll, relocation, advertising, and equipment leasing during the recovery period.

Business income and extra expense insurance is vital when lightning-related damage forces a business to halt operations. This coverage replaces lost income and helps manage additional costs incurred during the recovery period, such as renting temporary office space, leasing equipment, or advertising a new location.

Insurers recognize that interruption-related losses often exceed the cost of physical damage. For example, while a fire caused by a lightning strike might cost $100,000 to repair, a manufacturing company could lose far more in revenue during weeks of downtime. This makes business income coverage a key part of a complete insurance strategy.

For SMEs, this type of coverage can mean the difference between recovery and permanent closure. When revenue stops, businesses still face ongoing obligations—payroll, rent, loan payments, and supplier contracts. Extra expense coverage ensures that they can resume operations as soon as possible, even under temporary conditions.

Coverage typically starts after a defined waiting period (e.g., 72 hours) and continues until the business resumes normal operations, subject to policy limits.

Business owners should work with insurance professionals to calculate an accurate income projection, which determines the level of coverage needed. Factors such as seasonal fluctuations, historical revenue data, and fixed vs. variable costs should be considered.

Policyholders should also be aware of the terms related to covered perils. If lightning is excluded or not clearly defined in the policy, claims could be denied.

Adding a utility services endorsement can enhance protection by covering income loss due to outages caused by damage to public utilities.

For insurers, offering this coverage not only reduces client business failure rates but also strengthens long-term policyholder relationships.

It demonstrates a comprehensive approach to risk management, particularly for SMEs in regions where lightning strikes are common.

Utility services endorsement

A utility services endorsement provides added protection for businesses facing losses due to the interruption of essential services such as electricity, water, and gas.

Offers additional coverage for interruptions in electricity, gas, or water supplied by public or private utility providers, enhancing standard business interruption and extra expense policies.

These disruptions, often triggered by lightning strikes damaging utility infrastructure, can halt operations entirely—particularly for SMEs that lack backup systems or alternative service arrangements.

Standard business interruption and extra expense insurance policies may not automatically cover losses stemming from utility service outages unless this endorsement is included.

• For insurers, this gap in coverage can lead to disputes or dissatisfaction if policyholders assume such events are included. Offering utility services endorsements allows carriers to close this gap, provide more transparent protection, and reduce claims friction following weather-related events.
• For SMEs, the endorsement ensures financial continuity when critical utilities go offline. For example, a restaurant that loses refrigeration during a power outage caused by a nearby lightning strike may have to discard inventory and close temporarily.

A manufacturing facility may face production stoppages, resulting in missed delivery deadlines and contractual penalties. Without this endorsement, any income loss or added expenses from these outages may not be recoverable under the base policy.

Coverage may apply to direct physical loss at the utility provider’s equipment or transmission lines, as well as indirect consequences for the insured business.

However, businesses must review policy language carefully. Some endorsements limit coverage to damage occurring on the utility’s premises, while others may extend it to off-premises damage within a specified distance. It’s also important to determine whether coverage applies to overhead and underground utility lines.

Insurers should work closely with brokers and agents to help clients assess their exposure to utility service interruptions.

Businesses in rural or storm-prone regions, or those heavily dependent on continuous service for refrigeration, machinery, or data systems, have the most to gain from this added protection. Promoting awareness of utility services endorsements helps prevent underinsurance and increases policyholder confidence in their coverage.

Standard homeowners insurance policies cover lightning damage, such as fire. Some policies also cover power surges caused directly by lightning strikes.

The Lightning Protection Institute (LPI) noted that lightning strikes can occur up to 100 times per second.

What makes these states more prone to lightning-related damage than other states that didn’t make this list?

It all boils down to how prone each state is to more frequent thunderstorms. Lightning strikes and thunderstorms are inherently related, and once lightning occurs, thunder usually follows.

As expensive as insurance may be, it’s still advisable for homeowners who live in these high-risk states to invest in the proper plan that can compensate them appropriately for lightning damage incurred.

U.S. Homeowners Insurance Claims for Lightning Losses

Over $1.2 bn in lightning-related homeowners insurance claims were paid to more than 70,000 policyholders in the U.S., with $194 mn attributed to Texas alone, according to Triple-I.

• The total value of lightning-related claims increased by over 30% in 2024, reaching $1.27 bn from $950 mn in 2023.
• The number of claims rose by 13.8%, from 62,189 in 2022 to 70,787 in 2024, with the top 19 states accounting for 57% of the total.
• The average cost per claim grew by 14.6%, from $15,280 in 2022 to $17,513 in 2024.

$950 mn in lightning-caused U.S. homeowners insurance claims were paid out to 62,000-plus policyholders, with $125 mn of the total attributable to California alone

Tim Harger, executive director of LPI, stated that recovery from lightning strikes can severely affect business operations. Structural damage, electrical system failures, income loss, and business interruption are among the common consequences. He advised SMEs to evaluate their exposure to lightning-related risks and take preventive measures to secure their operations.

Recovery costs from lightning can be devastating to a business. Not only can it cause damage to structures and electrical systems, but it can result in business interruption and lost income. Every SME should assess their risk and take action before a strike happens. It’s the first step to protecting their operations — and their future.

Tim Harger, executive director, LPI

He pointed out that smaller firms, which face greater vulnerability during disasters, typically lack the same risk management infrastructure.

Top 10 States For Homeowners Insurance Lightning Losses

Rank	State	Value of claims	Number of claims	Average cost per claim
1	Florida	$104,544,285	6,003	$17,416
2	Georgia	87,110,761	5,161	16,877
3	Texas	194,288,888	4,664	41,654
4	California	83,367,791	4,608	18,090
5	Alabama	54,981,756	3,508	15,673
6	Louisiana	35,167,375	3,050	11,529
7	North Carolina	35,544,243	2,881	12,337
8	New York	50,785,848	2,458	20,659
9	Pennsylvania	27,219,044	2,214	12,296
10	Tennessee	39,792,330	2,136	18,630
	Top 10 States	$712,802,320	36,684	19,431

Your homeowners insurance covers damage from lightning strikes — but only for certain types. To properly protect yourself from damages caused by lightning, it’s important to know just how your homeowners insurance covers you.

How homeowners insurance covers lightning damage?

A lightning strike can create a fire inside or outside your home, ruin sensitive appliances, damage electronics and wiring inside the walls, and even injure you while you’re inside.

A standard homeowners insurance policy should also provide coverage for:

• Personal property, such as electronics, appliances, furnishings, or other interior possessions damaged or destroyed by a lightning strike. Most insurers provide coverage for personal possessions at approximately 50 to 70% of the amount of insurance you have on the structure of your home.
• Additional living expenses, meaning the cost of living elsewhere while your damaged home is repaired or rebuilt. This coverage usually equates to approximately 20% of the dwelling’s value.
• Other structures, including damage to a garage or shed on your property, typically up to 20% of your dwelling coverage limit value.

How do insurers assess lightning damage?

How your insurance company will assess lightning damage depends on your specific insurer and the type of damage that was done.

Lightning strikes can cause fires inside or outside your home, ruin expensive appliances and electronics, damage wiring in the walls, and potentially shock and injure you or someone in your household.

The good news is lightning is covered by almost all homeowners insurance policies.

FAQ

…………………..

AUTHOR: Nataly Kramer – Insurance Editor, Beinsure // QUOTES: Sean Kevelighan – Triple-I CEO, Tim Harger – executive director, LPI