Whether you are a tenant or a building owner, business flood insurance covers damage caused by a flood. If you are a building owner, flood insurance typically covers the building and contents. If you are a tenant, flood insurance is limited to the contents.
In the U.S., flood coverage is offered through the National Flood Insurance Program (NFIP) and private insurers.
Limitations of Commercial Property Insurance
Commercial property insurance is a requirement for most businesses, even small businesses. Many business owners believe this insurance protects them against flooding, but this is not the case.
Flood insurance is separate from commercial property insurance. Within the U.S., standard commercial insurance policies do not include flood insurance. If you have added flood insurance in an upgraded policy, this is sufficient. However, a standard commercial insurance policy specifically excludes flooding and water damage caused by flooding.
Does Your Business Need Flood Insurance?
Some businesses are required to have flood insurance for a variety of reasons, while other businesses carry flood insurance for practical reasons.
When is Business Flood Insurance Required?
Businesses may be required by their mortgage lender to carry flood insurance.
As an example, businesses located in a high flood risk area and occupy a building purchased with a mortgage from a federally regulated lender are among those required to carry flood insurance.
Practical Considerations for Flood Insurance
Besides businesses in a high flood risk area, there are compelling reasons for other businesses to also carry flood insurance.
Any business located within an area with moderate risk should also consider flood insurance. According to the Federal Emergency Management Agency (FEMA), 25% of small businesses affected by a disaster never reopen. Furthermore, the financial strain caused by natural disasters without the right insurance coverage causes many businesses to close permanently.
Flood damage can be extensive. Depending on the location of a business, its assets, and the nature of the products and services sold, flood insurance can be very important to a business’s long-term viability.
What Business Flood Insurance Covers
Flood insurance does not replace commercial property insurance. Rather, it’s usually a separate policy. Plus, there are certain limitations to what flood insurance covers.
Building and Contents
Flood insurance policies cover water damage done to a building and its contents. This may include flooding caused by excessive rainfall, storm surge, melting snow, overflowing water bodies (drainage, rivers, streams, lakes, etc.), broken dams or levees, and other sources of flooding.
Contents within the building are covered by flood insurance, but property not in a building covered by flood insurance is generally not covered. For example, vehicles, equipment, and supplies stored or parked outside of the building are typically not covered in the event of flood damage. However, property not covered by flood insurance can be insured with an additional policy.
The legal definition of a flood is water covering at least 2 acres or 2 properties. Flooding can be from a natural or manmade body of water or water source. If your business has flood insurance, consult your policy for the coverages.
Flood insurance policies from the NFIP do not cover the loss of revenue or the costs resulting from the business being closed as a result of a flood. These losses may be covered by purchasing private insurance.
Mold & Water Damage
With an NFIP flood insurance policy, there is coverage for many instances of mold, mildew, or long-term water damage caused by flooding. These instances are evaluated on a case-by-case basis.
If mold, mildew, rotting wood, or other conditions existed before the flooding and were not appropriately addressed, they will not be included in the coverage.
Flood Insurance Coverage Details
Business flood insurance is sufficient for many small to medium businesses.
Coverage for flood insurance begins 30 days after the policy is approved. Therefore, a business should not wait for an oncoming weather event to purchase flood insurance.
A business with the potential of flooding should apply for insurance early.
The NFIP’s business flood insurance policies offer coverage of up to $500,000 for the building and an additional $500,000 for the contents. Larger businesses, or those with high-value assets, may need additional coverage to ensure the entire building and its contents.
ABC Dennis Insurance Agency
ABC Dennis Insurance is an independent insurance agency established in 1997 that provides flood insurance to its customers. If you have not reviewed your flood insurance this year, please call our office at (813) 949-7765 or email us.
Besides flood insurance, we can help with all your insurance needs. As an independent agency, we find the best insurance coverage with the most competitive rates.