It likely comes as no surprise that both natural disasters and flooding can not only damage a home, but also a business. Unlike traditional business or general property insurance covering natural events such as lightning and wind, flood insurance is not included. Instead, flood insurance needs to be purchased separately.

Often, many business owners ask the question of whether or not flood insurance is worth the money, and if they’ll ever need it.

This is the first mistake many business and property owners make, and homeowners alike. Although you may never need flood insurance, especially if you live in a low-risk flood zone, flooding can still happen. As little as one serious flood could put you out of business, destroying life’s work, your cash flow, and perhaps even causing you to lose your house, impacting other areas of your life outside of your business.

Purchasing flood insurance protects you against this, for a relatively small payment that protects you against flood damage.

This article will discuss what flood insurance covers, what’s not included in flood insurance, and why should you purchase flood insurance as a business owner.

So, flood insurance is not included within my regular insurance?

No, flood insurance is not included within your regular property or commercial insurance. The same applies to housing, flood insurance must be purchased separately. This includes flooding in the wake of other natural disasters, including hurricanes or other storm activity.

Flood insurance for your business can be purchased from the federal government’s NFIP (national flood insurance program), issued by certified insurance brokers.

What does commercial flood insurance cover?

In the event of a flood, whether subsequent hurricane damage or flash flooding, commercial flood insurance covers damage caused to your property and the belongings inside. This also includes both property and business content losses from overflowing of streams or rivers, prolonged or heavy rain, melted snow, broken drainage systems, and other similar “flood-related” causes.

However, for your insurance to kick in and the water damage to be considered a “flood”, the water must cover at least 2 acres or affect more than one property. If this is not the case, your insurance will sadly not kick in. Nonetheless, if the water damage is from above e.g. melted snow, rain, gutters overflowing, then your regular property/commercial/business insurance will likely cover this - so don’t fret.

What does commercial flood insurance not cover?

Now that we’ve discussed what’s covered by flood insurance, let’s discuss what’s not covered.

Generally, a property outside of your building or business will not be covered by the insurance provider. For example, damage to landscaping will not be covered as this is not included within the building.

Furthermore, if you have one or more business vehicles and these are damaged, or worse written-off due to flooding, then these are also not covered, unless they are in the building. However, comprehensive commercial insurance can cover business vehicle insurance - so if your vehicles are damaged as a result of flooding, you will be covered.

Finally, as to be expected, financial losses or interruption to your business (e.g. sales) are not covered by flood insurance.

Purchasing commercial flood insurance

Flood insurance is required if you have a mortgage from a federally regulated insurance lender. However, if this is not the case, then you do not need to purchase commercial flood insurance. Despite this, we highly recommend investing in flood insurance for your business, not doing so puts your business and assets at risk, even if you don’t live in an area of high flood risk.

Flood insurance for your business can be purchased from NFIP and other private insurance companies. It’s important to note that this type of insurance is not purchased directly from the government, instead issued by government-certified or private insurance companies.

Once you’ve purchased flood insurance, it typically takes 30-days to kick-in. So, don’t leave it until the last minute, especially if storms and flood risk is on the rise in your local area. Likewise, insurance companies can also freeze insurance policies in the wake of storms such as hurricanes or flash flood alerts. This is to prevent fraudulent activity in regards to claims of business or property owners purchasing this insurance when flooding is imminent.  

Therefore, if your business or property is located in a high-risk flood zone, purchase flood insurance ahead of time. This protects you, your business, assets, and your employee’s jobs - don’t cheap out and risk it all, flooding can happen to anyone, don’t fall victim.

Finally, it’s worth noting how much flood courage can actually cover. Generally, commercial flood insurance covers up to $500,000 for the building and a further $500,000 for the contents. This is much higher than traditional home insurance as often business stock is more valuable and held in masses, flood damage to a business can be financially devastating.