Flood events have increased dramatically across the country in recent years, devastating numerous homes and businesses. While most standard insurance policies will cover water damage, flood events are largely excluded, leaving many commercial property owners vulnerable to significant financial losses. However, there are still a variety of ways to obtain flood insurance coverage to ensure your business is protected should a disaster occur.
The Importance of Flood Insurance
Flood events pose a significant threat to businesses of all sizes. While some may assume flooding only occurs in so-called “high-risk zones,” this is largely not the case. In 2024 alone, there were an unprecedented 91 flash flood emergencies issued by the National Weather Service, more than any other year since 2003.
With this in mind, obtaining adequate flood insurance should be a top priority for all business and commercial property owners to ensure their investments are well protected.
What Does Flood Insurance Cover?
If a business or commercial property is damaged from a flood event, flood insurance can help to cover the repair costs for the contents in and out of the property.
Items included in most flood insurance plans are broken into two categories: building coverage and contents coverage, which include:
Building Coverage
- Electrical and plumbing systems
- Furnaces and water heaters
- Appliances
- Permanently installed carpeting
- Permanently installed cabinets, paneling, and bookcases
- Windows
- Foundation walls and staircases
- Detached garages
- Fuel tanks, well tanks, and pumps
- Solar equipment
Contents Coverage
- Personal property, clothing, and furniture
- Curtains
- Portable and window air conditioners
- Carpets not included in building coverage, such as carpeting installed over wood floors
- Currency, precious metals, and valuable items
What Doesn’t Flood Insurance Cover?
Often, the cause of a flood plays a significant role in determining whether coverage applies. For instance, in some plans, a flood can be defined as an excess of water on land that’s usually dry and impacts at least two acres of land or two or more properties.
Commercial flood insurance will not cover any business property outside of the impacted building, or the following:
- Financial losses due to business interruption
- Damage to company vehicles
- Valuable papers and documents
Types of Commercial Flood Insurance
Commercial flood insurance can help protect both a business’s physical location as well as the contents inside of it. Because this coverage is excluded from most standard policies, it must be obtained as a separate policy through the National Flood Insurance Program (NFIP) or from a private insurance provider.
National Flood Insurance Program
The NFIP is managed by the Federal Emergency Management Agency or FEMA and offers federally backed flood coverage for both residential and commercial properties. While obtaining coverage through the NFIP is a good way to protect your investment, it does come with certain limitations.
For instance, NFIP coverage may have policy limits of up to $500,000 in coverage which may not fully protect all of a company’s assets. Should a property need to shut down temporarily or permanently after a flood, business interruption coverage will not be included in an NFIP plan and will need to be obtained separately. Policyholders may also experience higher premiums in high-risk flood zones where coverage may be mandatory.
Policies obtained through the NFIP will only cover one building/structure on the property. This means that if a business owner has multiple locations, they will need to obtain a separate policy for each one to ensure adequate coverage.
Private Flood Insurance
Private flood insurance is obtained through independent sectors that have their own reinsurance programs, which are not subject to the requirements set by FEMA. These plans offer additional protections beyond the limits of a standard NFIP policy. This is especially beneficial for companies with significant assets, high-value properties, or for businesses that require coverage exceeding NFIP limits. These plans can also be tailored to meet the unique needs of some companies.
How to Ensure Your Business is Properly Covered for a Flood Event
Purchasing flood insurance is incredibly important and should be thoroughly executed to ensure your business is adequately protected in the event of a flood. Company owners must consider the location of their business and determine if it is situated in higher-risk areas, such as along the coast or near large bodies of water, which may increase the potential for flooding. This could result in higher premiums when purchasing a policy through the NFIP or a private insurer.
Business owners must review their existing flood coverage for potential gaps and ensure they are addressed by purchasing additional coverage well in advance of a flood occurring. Any policy exclusions or limitations also must be well understood to help avoid any surprises down the line. If any questions or concerns arise during this review process, it would be incredibly beneficial to consult with an experienced commercial insurance claims attorney.
Commercial Property Insurance Claims Attorneys
Claims for flood-related damage are often complex and can be challenging to navigate, no matter how well you know your commercial policy. At Raizner Slania, our Board-Certified insurance recovery attorneys can help review your commercial flood policy or help you recover what your insurer rightfully owes. Contact us today to see how we can best help you and your business.