Does My Business Insurance Cover Flood Damage?Posted on Mar 24, 2021
There are many perils involved in owning a business today. For this reason, many business owners purchase various commercial insurance policies. Unfortunately, many are surprised and dismayed to learn, only after they need to file a claim, that among the perils not covered by their many insurance policies is a flood.
In fact, you need specific commercial flood insurance to protect your building, your equipment, your inventory, and your fixtures from flood damage.
The bottom line is that if you do not have a business flood insurance policy, you are not covered for flood damage to your business, your inventory, or your property.
Flood Insurance Requirements for a Commercial Property
If you have a mortgage on your commercial property, there is probably a clause requiring you to purchase flood insurance. It covers the bank’s investment in your business at the very least. Beyond that, it’s in your best interest to protect your investment in your business with sufficient flood insurance coverage to meet your needs.
There is no one-size-fits-all solution when it comes to insurance. However, if your business is located in a low to moderate-risk area for flooding, you’ll receive preferred insurance rates — and it’s a worthwhile investment for the peace of mind it delivers alone.
If your property is located in a high-risk area for flooding, you really can’t afford to be without flood insurance for your business, equipment, and inventory.
The time to decide if flood insurance is the right move for your business is as soon as possible. If you wait until a storm is bearing down on you, you might find you’re out of luck. NFIP enforces a 30-day delay before coverage begins. Private insurance varies but is often at least 15 days depending on the policy you choose.
The exception to this is when you’re purchasing your business or refinancing. If you purchase flood insurance at the closing table, it is immediately effective.
Do You Need Business Flood Insurance?
The short answer is, “Yes!” Even if you don’t think you need flood insurance or that your business is at risk for flooding. Nearly 20 percent of all flood claims each year are in areas that are considered low or moderate-risk areas — many of them in areas that have never flooded before.
As weather trends intensify and worsen, we can look for more widespread extreme weather events that lead to flooding. New Jersey is no stranger to these punishing events that can cause widespread flooding. There were seven hurricanes or tropical storms in 2020 alone!
Each of these storms resulted in massive payouts from the National Flood Insurance Program (NFIP). Once you accept that you need commercial flood insurance for your business, you must decide if you prefer to insure your business through the NFIP or need the broader and more flexible protection of private flood insurance.
What’s the Difference Between NFIP and Private Flood Insurance?
The National Flood Insurance Program operates through FEMA. There are many benefits to purchasing an NFIP commercial flood policy, as well as a few limitations. The most significant limitation happens to be the maximum coverage amount.
While many floods are only a few inches into the building, floods and tidal surges can remove your building (and everything inside) from its foundation.
Unfortunately, the maximum coverage amount for commercial flood insurance through the NFIP is $500,000 for the building and $500,000 for the contents. Additionally, the contents inside your building, including office equipment, computers, cash registers, etc., are subject to depreciation rather than being insured for their replacement value at today’s rates.
Private flood insurance offers options that NFIP does not. For instance, you can insure your business structure for more than $500,000, and you can elect to get replacement cost coverage for your equipment, inventory, and supplies rather than actual cash value.
The other benefit most people experience with private flood insurance is the personal touch and assistance of private agencies when filing claims. This isn’t always the case when working with FEMA who may be dealing with hundreds of thousands of claims simultaneously.
Otterstedt Insurance Agency Can Help You Get the Commercial Flood Insurance Your Business Needs
Otterstedt Insurance Agency understands the challenges businesses face when it comes to buying insurance.
We can help you determine how much business flood insurance your business requires and to make sure you get the best type of coverage for your needs, your budget, and your peace of mind.