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Commercial Flood Insurance

In the United States, there are two primary options for purchasing flood insurance: private flood insurance and the National Flood Insurance Program (NFIP) administered by the Federal Emergency Management Agency (FEMA).

If your business isn't in an area prone to flooding, that doesn't mean a flood can't devastate your business. You should know that flooding can occur anywhere, and your insurance policy might not cover all the losses.

Flood, by definition in NFIP policies, is defined as:

1. A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (one of which is your property) from:

  • Overflow of inland or tidal waters;
  • Unusual and rapid accumulation or runoff of surface waters from any source;
  • Mudflow.

2. Collapse or subsidence of land along the shore of a lake or a similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels which result in a flood as defined in A.1.a. above.

Understanding the National Flood Insurance Program

Commercial flood insurance helps your business recover from flooding that damages your building and contents. The Federal Emergency Management Agency (FEMA) administers the government's National Flood Insurance Program (NFIP). Congress established the National Flood Insurance Program (NFIP) in 1968 to help individuals and businesses protect themselves from the financial costs associated with the damage caused by floods.

Communities across the United States participate in floodplain management. Floodplain management is a community-based approach to managing flood risk, which involves a range of measures to prevent or reduce the impact of flooding in a particular area. This approach typically involves a combination of land use planning, zoning, building codes, and engineering measures to minimize the risk of damage to homes, businesses, and other infrastructure from floods.

The National Flood Insurance Program establishes flood insurance rates that differ from business to business. The flood insurance premium is based mainly on the elevation of the lowest ground floor of a structure, then the foundation type, building age, and your region's flood hazard as determined by the Federal Emergency Management Agency (FEMA). The maximum limits available for non-residential buildings and business contents in the NFIP is $500,000 each, this is one limiting aspect of the NFIP. Higher limits are available depending on the building occupancy type, for instance, multi-family structures like condos apply a maximum of $250,000 per unit for building coverage

National flood insurance can be purchased through your agent. Once purchased, there is a 30-day waiting period (established by FEMA regulations) before your policy takes effect. If coverage is needed to close on a mortgage, this 30-day waiting period can be waived. For this reason, purchasing flood insurance well before a potential flood event is on the weather forecast is necessary.

Aerial view of flooded houses and rescue vehicles saving people in town

Private Flood Insurance

Private flood insurance is now offered by various insurance companies and is typically priced based on the level of flood risk and coverage limits needed. Private flood insurance carriers offer different coverage options than the NFIP, such as higher coverage limits on buildings and contents, which can be especially important for businesses with high-value assets at risk of flood damage. Private policies may also cover additional expenses, such as loss of business income, and extra expenses associated with restoring the business after a flood.

Generally, the broader coverage and higher limits available through private flood insurance policies may come at a higher cost than the coverage provided by the National Flood Insurance Program (NFIP). However, it's important to note that private flood insurance premiums can vary widely depending on the level of risk, the location of the property, and the amount of coverage needed. In some cases, private flood insurance premiums may be lower than NFIP premiums, particularly for properties with a low to moderate risk of flooding.

Ultimately, the cost of flood insurance for your business will depend on various factors, and it's important to shop around and compare quotes from different insurance companies to find the best coverage and price.

It's important to note that regardless of which option you choose, flood insurance is important for protecting your property from costly damage and loss caused by flooding. It's also important to understand the coverage and exclusions of any policy you purchase to ensure it meets your needs

Also Read: Commercial Private Flood Insurance Vs National Flood Insurance Program

What Does Commercial Flood Insurance Cover?

Commercial flood insurance covers the expenses incurred when a flood damages your building or contents. The items below represent what is covered by a flood insurance policy's building and contents coverage.

Building Coverage

  • Awnings and canopies
  • Blinds
  • Carpet permanently installed over unfinished flooring
  • Central air conditioners
  • Elevator equipment
  • Fire extinguishing apparatus
  • Fire sprinkler systems
  • Walk-in freezers
  • Furnaces
  • Light fixtures
  • Outdoor antennas and aerials attached to buildings
  • Permanently installed cupboards, bookcases, paneling, and wallpaper
  • Pumps and machinery for operating pumps
  • Ventilating equipment
  • Wall mirrors, permanently installed

In the units within the building, installed:

  • Built-in dishwashers
  • Built-in microwave ovens
  • Garbage disposal units
  • Hot water tanks, including solar water heaters
  • Kitchen cabinets
  • Plumbing fixtures
  • Radiators
  • Ranges
  • Refrigerators

Non-Residential Contents Coverage

  • Furniture and fixtures
  • Machinery and equipment
  • Stock
  • Other personal property owned by you and used in your business

Risks of Flood Damage to Businesses

Wildfires, tropical storms, hurricanes, torrential rainfall, and excessive snow are all causes of flood. However, health and safety risks are also present during and after flooding.

Floodwater mishaps make it easy to encounter an array of health and safety risks, including:

  • Structural damage
  • Electrical damage and electrocution risk
  • Sharp glass and metals in flood water
  • Sanitary hazards and diseases from standing water
  • Contaminated drinking water
  • Defunct drainage and sewage systems
  • Cut off communications
  • Road and bridge destruction
  • Landslides
  • Damaged crops

Loss of life

The most severe result of flood damage can cause loss of life.

Emotional hardship

Victims of a flood can sometimes confront difficulty coping, which includes anxiety, depression, fear, anger, frustration, sadness, and grief. Such symptoms can disrupt personal relationships, disturb sleep, prohibit food intake, and cause other symptoms. For this reason, specialists in a specific mental health field are trained and prepared for catastrophes initiated by FEMA and the RED CROSS.

Property damage

Water damage from floods causes ninety percent of all natural disasters' extensive damage. Homes, businesses, cars, equipment, nothing escapes such flooding. Just a few inches of water can severely damage the contents of your home or business, the buildings, and the surrounding area.

Economic loss

Not all insurance policies cover flood damage, which can strain water damage victims financially. The 2011 cost of flooding in the U.S. was nearly $8.5 billion. Ensure your business is sufficiently covered by flood insurance by verifying your policy coverage or purchasing a flood policy for the first time. Don’t depend on flood disaster relief from FEMA to get your business back to normal operations; get a commercial flood quote now.

Frequently Asked Questions about Commercial Flood Insurance

1. Does the law require commercial flood insurance?

Federal law requires that the purchase of Flood insurance for buildings and structures in Special Flood Hazard Areas (or SFHAs) to be eligible for any federally related financial assistance or when acquiring a mortgage loan for property or buildings in high-risk flood areas (Special Flood Hazard Areas or SFHAs) from a federally regulated lender.

2. Do I need commercial flood insurance if I already have business property insurance?

Yes! Commercial property policies (and Homeowners policies) almost always exclude coverage for damage caused by flooding. A separate policy must be purchased to protect your business from the costs associated with flood damage.

3. What are the commercial flood insurance coverage limits?

For commercial flood policies through the NFIP, the maximum insured value on buildings is $500,000, and on business contents, $500,000. Private flood policies have no such limitations. In addition to higher limit availability, additional coverage is available such as loss of business income and extra expenses you cannot purchase on an NFIP policy.

4. How much does commercial flood insurance cost?

The premium for business flood insurance can range from $500 to thousands of dollars per. However, it's important to note that private flood insurance premiums can vary widely depending on the level of risk, the location of the property, and the amount of coverage needed. In some cases, private flood insurance premiums may be lower than NFIP premiums, particularly for properties with a low to moderate risk of flooding.

5. How do I file a claim for business flood insurance?

Follow these tips for a smoother flood insurance claims process.

File as soon as possible - It is important to file a notice of loss with your flood insurance company as soon as possible after experiencing flood-related damage. Most flood insurance policy forms require policyholders to give prompt written notice of any damage caused by a flood. This notice should include your policy number, a detailed description of the damage, and any supporting documentation, such as photos or videos. You can typically file a notice of loss by contacting your insurance agent or company directly.

Organize - It is important to separate any damaged property from undamaged property. Your flood insurance policy typically requires this separation to assess and document the damage properly. Make every effort to protect undamaged property and move items you want to save to a safe, dry place, such as a second story or outdoors. Do not delay cleaning up after a flood; leaving items in water for too long can cause even more damage.

Consult with your adjuster or insurer on covered cleaning expenses, measures to prevent further flood damage or repair services. Your insurance company may be able to provide guidance on how to properly clean and restore your property, as well as recommendations for contractors or restoration services.

Remember to keep all documentation related to the damage and cleanup process, including receipts and invoices for any expenses incurred. This will help ensure you are fully reimbursed for costs covered under your flood insurance policy.

Document and Itemize - For business personal property coverage, you will likely be required to provide your insurance company with a list of damaged business personal property. This list should include any related details or documents that can help support your claim.

Here are some tips on making a list of damaged business personal property:

a. Start by making a comprehensive list of all the items that have been damaged. This may include furniture, electronics, clothing, and other personal belongings.

b. For each item, try to provide as much detail as possible, including a description, its value, and any receipts or other documentation you have that can help establish its worth.

c. Take photos or videos of the damage to each item, if possible. This can help provide visual evidence of the extent of the damage.

d. If you have any items that are particularly valuable, such as jewelry or artwork, consider getting them appraised by a professional to help establish their worth.

e. Keep all receipts and invoices for any expenses incurred from the damage, such as cleaning or restoration services.

Remember to keep a copy of your list of damaged personal property and any related documents for your records. A detailed and accurate list can help ensure you are fully reimbursed for covered losses under your insurance policy.

If you have experienced flood-related damage to your structure, it is essential to document any areas of damage you want to point out to your adjuster.

Here are some tips for documenting structural damage:

a. Walk through your property and take photos or videos of any areas showing structural damage. Be sure to capture images of cracks, sagging or uneven floors, and any other visible damage.

b. If you notice any areas with water damage, such as walls or ceilings that have become discolored or have visible water stains, take photos of those areas as well.

c. Make a note of any areas where you have noticed an increase in moisture or humidity, as this can be an indication of hidden damage.

d. If you have any concerns about the stability of the structure, such as leaning walls or columns, be sure to point these out to your adjuster.

e. Keep all documentation related to the structural damage, including photos, videos, and any written notes or reports from contractors or inspectors.

Remember that your adjuster will be looking for evidence of damage to determine the extent of your covered losses. Providing a detailed and accurate record of any structural damage can help ensure that you receive the maximum reimbursement under your insurance policy.

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