Commercial Flood Insurance

What is Commercial Flood Insurance?

Floods can happen almost anywhere. Unlike wind or fire damage, flood damage is probably not covered under your general liability policy. When you think about protecting your business for the future, make sure you think about how flood damage could impact your work and your bottom line. Commercial flood insurance is here to help your business get back to work.

The basics of Business Flood Insurance

A flood is simply an accumulation of water on dry land. For the purposes of flood insurance coverage, though, the National Flood Insurance Program (NFIP), a program established by the federal government, is more specific and technical. 

  • Collapse or shifting of land along the shore of a body of water as a result of erosion caused by waves, currents, or water that is more than what is normally anticipated that result in a flood
  • Unusual, fast accumulation or runoff of surface waters from any source Inland or tidal waters that overflow
  • Mudflow, which is a river of liquid mud on the surface of generally dry areas. Landslides, slope failures, or saturated soil mass moving down a slope are not mudflows.

According to the NFIP, a flood occurs when two or more acres, or two or more properties, of normally dry land are partially or completely inundated with water generally or temporarily.

You may think that because your commercial property is positioned on a hill and are therefore immune to flooding. But just an inch of water can create tens of thousands of dollars of damage. Think about how close you are to rivers, streams, dams and snow melt. Heavy rain can cause flash flooding. Hurricanes can bring surges that go farther inland than you might expect.

Commercial flood insurance is meant to address these situations. You might be mostly worried about fire, but actually more properties are damaged by floods every year than by fire. 

National or Private Insurers?

The National Flood Insurance Program (NFIP) issues commercial flood insurance policies. They are a part of the federal emergency management agency (FEMA). NFIP have set up a standard risk assessment so that regardless of carrier, all flood insurance policies are assessed and priced similarly, and they work with communities all across the country to manage their floodplains effectively and efficiently. The NFIP rating system looks at the Where, How and What of your commercial property. 

Where is your commercial property situated?

Where are sources of flooding like rivers, lakes and coastal areas? What elevation is your business property at? Is your building situated in a community rated highly for storm-water management? Or is your property on a barrier island?

How is your commercial property built?

How many floors does the building have? How elevated is the first floor? Does your masonry and foundation type hold up well against floods? If the property you’re insuring is a single unit up above floor level, you’ll have a lower likelihood of flooding than a unit on the ground floor. If your commercial property is built well, the cost of your flood insurance may be lower on account of your lower risk.

What is covered?

Does your flood coverage encompass multiple structures or just one? What would the cost be to rebuild your commercial property after a natural disaster? What’s the value of the contents of your building?

What about Private Flood Insurance?

90% of flood insurance policies go through the federal government via the NFIP. Private insurance also can offer commercial flood insurance, and because the risk is taken on by an individual company, that company can offer higher coverage or different limits or offer expanded flood coverage. Talk to your insurance broker about what flood insurance is available in your area and by the company you trust.

Private insurance

90% of flood insurance policies go through the federal government via the NFIP. Private insurance also can offer commercial flood insurance, and because the risk is taken on by an individual company, that company can offer higher coverage or different limits or offer expanded flood coverage. Talk to your insurance broker about what flood insurance is available in your area and by the company you trust.

What does Commercial Flood Insurance cover or exclude?

They each have a separate deductible

For instance, if you have a state of the art facility where all important information, assets and money are stored in the cloud, the actual contents of your building (a few computers) is low, but the value of the building is high. Or maybe your equipment and product you store are both very valuable but the warehouse you work in is low cost. That’s why you should talk to your insurance agent to figure out what the right flood coverage is for you.

Building coverage includes:

  • Foundation walls, staircases, anchorage systems
  • Solar equipment
  • Fuel tanks, well tanks and pumps
  • Furnaces, water heaters, appliances
  • Permanently installed carpeting, cabinets, paneling and bookcases
  • Electrical and plumbing systems
  • Windows, detached garages

Contents coverage includes:

  • Electronic equipment
  • Appliances like washers, dryers, microwaves, portable air conditioners, etc
  • Carpets not included in building coverage
  • Currency, precious metals, and valuable items

Remember that a flood is described as excess water on two acres or two properties.  If, for instance, a water tank gives out, covering your building in two inches of water, the damage will not count. Flood insurance also doesn’t cover vehicles, important papers damaged in a flood, or items outside of a building, like parking lots. 

Additionally, flood insurance won’t cover financial losses incurred when business stops for the natural disaster and recovery.  

Should your business purchase Flood Insurance?

Are you required to purchase Flood Insurance?

If your business property is in a high risk area and you have a mortgage from a federally regulated or insured lender, you must purchase flood insurance. If your business is in a medium to low risk zone, you may still want to purchase flood insurance. Studies show that an average flood claim is for $100,000, and over a third of annual claims come from properties outside of high risk zones. 

The best rule of thumb is to think about how much a flood would set you back. Can you bear that cost by yourself? If not, commercial flood insurance is the way to go. 

Flood damage assessed

If the worst happens and your business experiences flooding, your flood insurance policy is there to help. Commercial flood insurance provides actual cash value for your assets, so your coverage will pay to repair or replace an item or building based on its cash value, minus depreciation. So your flood insurance won’t pay to replace an old item with a new one. It will give you the cash value of the item or property that was damaged or lost. 

Business owners should know that this flood insurance doesn’t start for 30 days after you start the claim. So if a flood happens within that thirty days, you won’t have coverage. That’s just one more reason you should assess your options and needs sooner, rather than later. 

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