Floods are one of the most destructive natural disasters that can damage businesses. In some extreme cases, a flood can force a business to close down and temporarily operate out of a different location. However, most commercial property insurance policies don’t include coverage for flood-related damages. To protect your organization from these types of damages, you need to purchase a separate policy.
If you own a business, you can obtain flood insurance through the National Flood Insurance Program (NFIP), which the Federal Emergency Management Agency (FEMA) manages.
Not all businesses have the same risk of flooding, nevertheless. Therefore, commercial flood insurance may be either optional or required, depending on several factors.
What Does Commercial Flood Insurance Cover?
Before explaining which types of businesses need flood insurance, it’s essential to know exactly what coverages are included in this kind of policy.
A standard commercial flood insurance policy — which normally involves annually paid premiums — typically features two primary coverages: building and contents coverage. Building coverage includes your business’s:
- Windows and blinds
- Floors and ceiling
- Electrical and plumbing systems
Meanwhile, contents coverage pays for damage to:
- Appliances built into the building
- Furniture (including non-permanently installed carpets)
- Fixtures (ceiling fans, HVAC systems, etc.)
The limit for each of these two coverage areas is $500,000. These are generally acquired separately and carry their own deductibles.
Commercial vehicles and outdoor property such as septic tanks and fences are generally not covered by flood insurance. The same is true for damages resulting from sewer backups.
When Is Commercial Flood Insurance Required?
According to the Insurance Information Institute, you must purchase commercial flood insurance if your business is situated in a high-risk flood location and if you have a federally-backed mortgage. Here is a close look at these two requirements.
High-Risk Flood Areas
FEMA designates high-risk flood areas as “V” or“A” zones. These regions are typically the most likely to sustain flood-related damages because of either their proximity to bodies of water (rivers, streams, lakes, etc.) or their elevation levels. Be sure to check FEMA’s flood maps to determine whether your business is located in these zones.
You are also required to buy flood insurance if you possess a mortgage from a government-regulated or insured lending institution.
Additionally, some lenders require businesses to carry flood insurance even if they aren’t situated in high-risk areas. Be sure to ask your lender whether it has specific requirements for commercial flood insurance coverage.
It’s also important to keep in mind that you must renew your commercial flood insurance policy each year in order to help cover the principal balance on your loan.
If your business has 500 or fewer employees and has received low-interest disaster assistance from the Small Business Administration (SBA), you need to maintain your flood insurance coverage to be eligible for federal loans in the future.
How Much Does Commercial Flood Insurance Cost?
The cost of commercial flood insurance typically depends on multiple factors, including:
- Your business’s location
- Your building’s size (number of floors)
- Your building’s age
- Your building occupancy
- Location of contents
- Elevation of ground floor relative to FEMA flood map
- Your business’s flooding history
- Your chosen deductibles and level of coverage for building and contents
According to CoverWallet, annual premiums for commercial flood insurance may range anywhere between $500 and thousands of dollars.
If your organization is in a low or moderate-risk flood zone, you may qualify for special policies with low rates or discounts.
It’s always important to carry flood insurance because according to FEMA, one inch of floodwater alone can cost as much as $25,000 to clean up.
Speak To The Commercial Flood Insurance Experts
Reach out to the professionals at JMG Insurance Corp for more information on the requirements for insurance. Since 1916, we have been dedicated to offering high-quality insurance to clients throughout Connecticut, New Jersey, New York, Hawaii, and Massachusetts. As an independent agency, we work closely with several reliable insurance providers and strive to form long-lasting relationships with all of our clients.
If you’re a business owner, your organization is located in a high-risk flood area, and you have a federally-backed mortgage, you will benefit significantly from purchasing flood insurance. Our policies, which we offer via the NFIP, include both building and contents coverage and are thus designed to protect every major aspect of your business. This includes HVAC equipment, appliances, and all plumbing and electrical systems. If you need additional coverage, we can work with your insurer to help you receive excess coverage above the $500,000 limits.