Commercial property insurance typically does not cover damage caused by floods. To protect your business property in the event of a flood, you need Commercial Flood Insurance. Even if your commercial property isn’t in an area that has a history of flooding, you still have some level of risk. It only takes a few inches of water to cause significant damage.
According to FEMA, approximately 25% of small businesses never reopen after a disaster. According to FEMA.org, the average commercial claim between 2010 and 2014 was $89,000. If your commercial property is damaged by a flood, the only way to have protection is to purchase flood insurance. Contact us to obtain a custom quote for flood insurance.
what is a flood?
The National Flood Insurance Program defines a flood as “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 (at least 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; or
- collapse of subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above.
what commercial flood insurance does and doesn't cover
Depending on the coverage you have purchased, commercial flood insurance generally covers physical damage to your building or its contents “directly” caused by a flood. For example, damages caused by a sewer backup are covered if the backup is a direct result of flooding. However, if the backup is caused by some other problem, the damages are not covered by flood insurance. Instead you need to purchase a special endorsement on your home policy called "water backup and sump overflow".
The National Flood Insurance Program (NFIP) offers coverage for business/nonresidential property commercial policy holders of:
Building property – up to $500,000
Contents of the business – up to $500,000
It’s recommended to purchase both types of coverage. Also, tenants should also consider flood insurance because regular tenant policies don't cover damage to a tenants building improvements and contents caused by flood.
Be aware that a Standard Flood Insurance Policy (SFIP) has exclusions including but not limited to not providing coverage for:
- Loss of revenue or profits
- Loss of use
- Loss from interruption of business
- Additional expenses incurred while building is being repaired
For more detailed information about flood insurance and what's covered, read the National Flood Insurance Program Summary of Coverage for Commercial Property
causes of floods
You don’t need to live next to a river, on water or coastal area to be the victim of a flood. While the risk of flood varies depending on the area, often overlooked causes of flooding include:
- Heavy rain
- Inadequate drainage systems
- Winter storms and nor’easters
- Hurricanes and tropical storms
- Snow melt
- Failed dams or levees
- Construction changing topography
30-day waiting period
In most cases, a 30-day waiting period applies before the policy becomes effective. Don’t wait until a threat presents itself to purchase protection. The only exceptions to this wait period are:
- if a lender requires flood insurance in connection with making, increasing, extending or renewing a loan
- if a flood map revision requires an additional amount of insurance
- if a lender determines that a loan that doesn't currently have flood insurance coverage needs to have flood coverage
don't assume you don’t need flood protection
Consider these facts:
- Floods and flash floods happen in all 50 states.
- Floods are the #1 natural disaster in the United States.
- 20 to 25 percent of all flood insurance claims are filed in low- to moderate-risk areas.
- There is a 26 percent chance of flooding during a 30-year mortgage, compared to a 9 percent chance of fire for buildings in high-risk flood areas.
- 90% of floods aren’t declared federal disasters leaving the full cost to rebuild up to the home or business owner. Flood insurance protects you whether or not a disaster is declared.
- From 2008-2012, the average flood claim amounted to nearly $42,000.
- In 2012, the average flood insurance policy premium was about $650 per year.
- Homeowners in low- to moderate-risk areas may be eligible for the Preferred Risk Policy with flood insurance premiums starting as low as $480 a year for $250,000 in coverage. Premiums for condominium and renter flood insurance are less.
- In 2012, The National Flood Insurance Program (NFIP) paid more than $7.7 billion in flood insurance claims to all policyholders.
- From 2003 to 2012, total flood insurance claims averaged nearly $4 billion per year.
purchasing flood insurance
You cannot purchase flood insurance directly through the federal government. Flood insurance can only be purchased through an insurance agent. For more detailed information about flood insurance, visit the official website of the National Flood Insurance Program, www.floodsmart.gov. Contact us to obtain a custom quote for commercial flood insurance.
NOTE: This information is only a general description of the available coverages and is not a statement of contract. All coverages are subject to all policy provisions and applicable endorsements. Some coverage may be subject to individual insureds meeting underwriting qualifications and to availability within a state. For further information contact a Murphy Insurance Agency Associate.