Do You Have Flood Coverage For Your Business?

Unless you have a separate flood policy, the answer is generally “no.” You can buy a special flood policy to cover this risk. They generally have a 30-day waiting period, so plan ahead if you might need coverage this rainy season.

Standard business property policies do NOT cover damage caused by “flood, surface water, waves, tides, tidal waves, overflow of any body of water or their spray, all whether driven by wind or not; mudslide or mudflow; water that backs up from a sewer or drain; or water under the ground surface pressing on, or flowing or seeping through foundations, walls, floors or paved surfaces; basements, whether paved or not; or doors, windows or other openings.” The business property policy does, however, cover “loss or damage by fire, explosion or sprinkler leakage.” So unless you have flooding caused by sprinkler leakage, your policy won’t pay.

The National Flood Insurance Program (NFIP) offers flood insurance to individuals and businesses in “participating communities.” These may be towns, cities, unincorporated county lands and tribal or native authorities that have chosen to participate in a floodplain management program.

Although mortgage lenders might not require you to carry flood insurance if your property is in a moderate-to-low risk area, nearly 25 percent of all NFIP flood claims occur in these areas. Most commercial buildings in a moderate-to-low risk area qualify for preferred rates.

Preferred-rate premiums start as low as $643 per year for both building and contents, while contents-only coverage starts at $185 per year. Businesses can buy up to $500,000 of insurance to protect your building and up to $500,000 to protect its contents.

High-Risk Properties

Federally regulated or insured lenders require mortgage holders in high-risk areas to buy flood insurance. In these areas, you can only buy standard rated policies, with separate building and contents coverage.

You can also buy flood coverage through private insurers. If you need flood coverage to meet the requirements of a federally insured loan, verify that the insurer is “admitted,” or licensed to do business in your state. Make sure the policy guarantees coverage at least as broad as the Standard National Flood Policy and that the insurer will provide thirty days’ notice to the insured and lender before canceling the policy.

A difference-in-conditions (DIC) policy may also provide flood coverage. Most DIC policies exclude coverage for floods, but these non-standard policies can often be tailored to cover unusual risks. DIC policies generally make most sense for larger insureds.