Posted on May 17, 2014
When heavy rains, snow melt, tropical storms and hurricanes strike, business owners can really suffer from damage cause by weather related flooding. In fact, the National Flood Insurance Program (NFIP) analyzed flood data from 2006 to 2010 and learned that the average flood claim was over $85,000. Additionally, after a flood disaster, forty percent of small businesses could not afford to reopen.
Commercial flood insurance protects businesses from this kind of financial devastation. The coverage insures company buildings and their contents so that when events happen, they can keep their companies going strong.
Determining Flood Insurance Rates by Area
When assessing flood insurance rates, the NFIP ranks businesses by whether they are located in a moderate to low or a high risk location. Moderate to low risk areas receive preferred insurance rates. These policies have the lowest premiums the NFIP offers for both building and contents coverage. For those who do not qualify for preferred risk policies, standard rates are available. High risk areas receive standard rates and typically are required to maintain commercial flood insurance by mortgage lenders if their property is financed. High risk policies receive separate coverage for building and contents. No matter what type of area a business is located, this coverage provides limited coverage for basements or crawl spaces.
What Does Flood Insurance Cover?
Flood insurance covers physical damage to business buildings and possessions. Business personal property can include furniture, fixtures, inventory and equipment. For actual buildings, the flood coverage will protect foundations, electrical systems, plumbing, air conditioning & heating, appliance, carpets, paneling, window treatments, detached garages and debris removal.
Commercial flood insurance will not cover such items as mold damage, currency, temporary living expenses, business interruption or vehicles.
Commercial Flood Insurance Basics
Reviewing what flood insurance policies actually cover is important so that business owners will understand the amount of flood coverage and whether other commercial insurance policies are needed. Like other types of insurance, commercial flood coverage has deductibles that apply to the coverage. The amounts differ depending on the whether building only, contents only or both coverages are chosen along with the amount of insurance selected. Another important consideration when applying for flood insurance is that there is a 30 day waiting period until the policies go into effect. The only exceptions to that rule is if the flood insurance is required by a lender in order to provide a new loan or renew an existing one, make lender required changes to an existing policy to increase coverage or during flood insurance policy renewal. Only insurance agents can sell flood insurance to businesses. Companies cannot buy directly from the government or NFIP.