Do I need Flood Insurance for my Business?

If you’re a business owner, you (should) already have a Commercial Package Policy (CPP) or a Business Owners Policy (BOP) to protect your assets. Unfortunately, neither of these policies typically offer any coverage for flood damage. While your commercial property insurance will usually cover damages from natural events like lightning, wind, or fire, flooding of any kind, from any source, will not be covered. If your business operates in a high-risk flood area and you’ve received a mortgage from a federally regulated or insured lender, you’ll be required to purchase a commercial flood policy.

Commercial flood insurance is highly specific and available through the National Flood Insurance Program (NFIP) or through some private insurers. Be sure to take note of what’s covered by flood insurance, and what isn’t.

The primary function of your flood insurance is to cover you for damage to your building and its contents caused by a flood. The flood source could be:

• Overflowing rivers/streams
• Heavy/prolonged rain
• Storm surge
• Snow melt
• Blocked storm drainage systems
• Broken dams/levees

Flood insurance also can cover damage from mold or mildew that may occur after a flooding. Mold or mildew existing prior to a flood will obviously not be covered. What else doesn’t flood insurance cover?

• Damage to property outside your business (landscaping, septic systems)
• Damage to business vehicles (this may be covered in a comprehensive business auto policy)
• Financial loss due to business interruption or loss of use

If you aren’t required to purchase flood insurance, you should do some research into your business’s risk of flooding. Is it located in or near a flood zone? Where in the building is equipment/inventory located? The lower the materials are, the higher chance of them being damaged in a flood.

In terms of actual protection, commercial flood insurance plans cover you up to $500,000 for your building and up to $500,000 for its contents. If you need more coverage than this, you can purchase excess insurance coverage which can insure your business up to much higher limits. While some business owners will be required to get commercial flood insurance, those who aren’t should still explore their options, and do the most to protect themselves and their business.