If you’re a small business owner, you know that there are certain risks your organization is exposed to. One such threat is flooding; floods are among the most common natural disasters in the United States and some properties are more vulnerable to this danger than others. Fortunately, you can protect your business by purchasing commercial flood insurance. Here is a close look at what this type of policy covers and why it’s beneficial.
What Does Commercial Flood Insurance Cover?
Like their personal counterparts, business flood insurance policies are provided through the National Flood Insurance Program (NFIP), which the Federal Emergency Management Agency (FEMA) oversees.
A standard commercial flood insurance policy typically includes building and contents coverage. The former covers your business’s physical structure, including foundation walls, floors, ceilings, window blinds, HVAC equipment, built-in appliances, and plumbing and electrical systems.
Contents coverage protects your business equipment, clothing, electronics, furniture (including non-permanently installed carpets), and portable appliances.
For businesses, limits for building and contents coverage are $500,000 apiece. These are generally acquired separately and have distinct deductibles.
Business flood insurance doesn’t typically cover commercial vehicles or outdoor items such as landscaping, fences, and septic systems (although detached garages are normally covered). It also does not cover claims related to damages resulting from sewer backup or mold or mildew.
Is Commercial Flood Insurance Optional or Mandatory?
According to FEMA, business flood claims cost $90,000 to resolve on average. Therefore, commercial flood insurance is extremely helpful for repairing flood-related damages. If mold has contaminated your property, you may likely spend even more time and money cleaning up these damages.
Additionally, commercial flood insurance is mandatory under two specific circumstances:
- Your business’s property is situated in a high-risk flood zone
- Your mortgage is provided by an insured or government-regulated lender
To determine whether you’re located in a high-risk flooding area, you can check FEMA’s Flood Maps. If you’re situated in either a coastal region (Zone V) or near a body of water (Zone A), you’re in a high-hazard area and should obtain commercial flood insurance. (Coastal areas are especially prone to both floods and storm surge).
Flood risks are also rapidly changing because of climate change and other related factors. Therefore, your area’s current flood map may not reflect your business’s true risk of flooding. In fact, FEMA estimates that more than 20% of claims filed through the NFIP come from properties in low or moderate-risk areas.
Disaster Assistance from FEMA or SBA
You are required to maintain your commercial flood insurance coverage if you’re located in a high-risk flooding zone and are a recipient of federal disaster aid from either FEMA (grants) or the Small Business Administration (SBA), which offers low-interest loans to organizations with 500 or fewer employees.
Nonprofits and agricultural businesses with 500 or fewer employees are eligible for SBA loans. If you fail to do this, your business may not qualify for future federal disaster assistance.
If there are ever any gaps in your flood insurance coverage, the rate you are charged will likely be based on your current flood zone. However, if you have continuously maintained coverage and your area’s flooding risk is reevaluated, you can use your previous zone’s flood risk, thanks to the “grandfathering rule.”
Should your small business meet any of these characteristics, it’s highly recommended that you obtain a commercial flood insurance policy. Your premiums will likely depend on several factors, including your building’s age, its occupancy (i.e. how it’s used), its size, your chosen limits and deductibles, and where your contents are located (below or above the base flood elevation).
Get Commercial Flood Insurance From JMG
Reach out to the agents at JMG Insurance Agency for more information on the benefits of commercial flood insurance for small businesses. Since 1916, we have been committed to offering high-quality insurance solutions to clients in Connecticut, New Jersey, New York, Hawaii, and Massachusetts. As an independent agency, we work closely with several prominent and reliable insurers.
If you own a small business, you can benefit significantly from acquiring flood insurance. One inch of flooding alone can cost up to $25,000 to clean up, per FEMA.
Our policies include both building and contents coverage, so you can rest assured that all of your property (up to the NFIP’s $500,000 limit) will be protected in the event of a flood. Contents coverage will protect your clothing, business equipment, electronics, furniture, and portable appliances.
At JMG, we understand the damage that floods can cause and are dedicated to assisting your business. Call JMG today at (844) 304-7332 or contact us online to learn more about our commercial flood insurance policies.