Natural disasters can be devastating to businesses. While damage caused by some types of natural events—such as lightning or wind—will usually be covered by commercial property insurance, you need a special policy if you want protection from flood damage.
Don’t drown your profits…
According to the Insurance Journal, 2017’s hurricane season was the most expensive ever in the U.S. costing us $202.6 billion in damages. That year we experienced 17 named storms and 10 of those turned into hurricanes. Fast forward to 2022 when 14 named storms slammed the Atlantic resulting in the third most costly hurricane season on record.
Hurricanes are obviously a concern near the coast, but flooding can also come from many other sources. Flooding happens to be one of the most hazardous natural disasters, but surprisingly it’s the least insured against.
The word flood is a general term used to describe events like rising waters caused by heavy rains, water from a broken levee, or even mud carried by waters that overflow from a river or stream. Most commercial insurance companies exclude coverage for flood damage. The good news is that insurance is available to protect your investments through the federal government’s National Flood Insurance Program (NFIP).
It’s a common misconception that flood insurance is only for properties in a known flood plain – think near a river or by the ocean. In reality, flood insurance is available in areas of all 50 states, districts, territories, and outlying islands. Review the NFIP’s Community Status Book to determine whether your neighborhood makes the cut: NFIP’s Community Status Book.
Consider this …
Does your business need insurance just because it’s located in a neighborhood on the FNIP’s list? Maybe. Here are some other criteria to consider:
- Your business is located in an area susceptible to an overflow of inland or tidal waters.
- You’re situated near areas where storm surges could cause flooding.
- Unusual and rapid accumulation or runoff of surface waters is a known problem.
- Your mortgage company requires it.
Flood policies underwritten by the NFIP have a 30-day waiting period. Afterward, the policy will cover direct physical damage to covered property up to the actual cash value (ACV) or the policy limit, whichever is less. Deductibles usually apply and coverage can be purchased up to $500,000 for buildings and $500,000 for contents, and sometimes more. Coverage can include buildings, electric and plumbing systems, furniture, stock, and improvements made as a tenant.
It’s of extra importance to business owners that neither flood insurance nor most commercial insurance policies cover a loss of business income that results from flooding. Accordingly, it’s especially important to protect buildings and contents with flood insurance to help defray a potential profit loss. In short, flooding can happen anywhere. Damage from flooding can take a devastating financial toll on businesses large and small. Consider flood insurance to prevent drowning your profits this spring, keep the 30-day waiting period in mind as you plan ahead.