While your business property insurance covers most damages to your business that occur because of theft, vandalism, and natural causes, it doesn’t include flood damages. If your business is located in an area that’s prone to heavy rainfall, melting snow, fluctuating weather, and other such weather-related concerns, it’s best to get commercial flood insurance to protect your building, as well as, inventory and machinery inside it from the possible damages.
Commercial flood insurance protects your commercial property from water-related damage and covers nearly everything inside the property, including business documents, inventory, equipment, furniture, exterior fixtures, and so on. In this post, we have discussed all you should know about commercial flood insurance, its coverage, what’s excluded from the coverage, and so on. Let’s take a look.
How Does It Work?
Standard business property insurance won’t protect your commercial property from flood and damage that occurs because of water leakage inside your building. You need a supplemental policy for that. That’s where commercial flood insurance comes into the picture. The policy works like other insurance policies.
You are supposed to pay a premium based on the insurance plan you choose, the location of your business, the level of risk you bear, and other factors.
If your property or the content in it gets damaged due to unpredictable weather, such as heavy snow or extreme rainfall, the commercial flood insurance policy will cover the repair cost associated with the damage. You will be compensated for the expenses you incur on the repair and replacement of the parts of the property that are damaged.
Commercial Flood Insurance Coverage
Like any insurance policy, flood insurance coverage depends on multiple factors, including the insurance provider, the policy you choose, and your risk factor. The policy covers the building and the content inside it. Here are a few things that are covered by nearly all types of flood insurance policies:
- Electrical and plumbing units
- Doors, windows, cabinets, bookcases, and panels
- Garage (both attached or detached)
- Pumps and fuel tanks
- Electric heaters, air conditioning units, and other electrical appliances
- Solar equipment (if you have)
In addition to the property itself, here is what the commercial flood insurance covers within your building.
- Your personal accessories, such as business documents, furniture, and fixtures
- Carpets and curtains
- Cash, jewelry, and other precious items that are of high value
- Computers, smartphones, and other electronics
What’s Not Covered by the Commercial Flood Insurance?
Before you sign up for a commercial flood insurance policy, make sure that the coverage depends on the cause of the flood. If it occurs on dry land and reaches your business property, wreaking havoc on the building and the stuff inside it, your insurance policy will cover the cost of repair and replacement needed to fix the damage. However, the damage must occur by floodwaters.
Also read: What is Management Liability Insurance?
Besides that, the National Flood Insurance Program (NFIP) has listed two major conditions that you must meet to recover your flood-related damage expense from the insurance provider. It must affect a minimum of two acres of land, as well as, more than two properties. Note that if the damage occurs because of the failed pump sumps, the flood insurance policy won’t cover that. This should be included in your business insurance property. Simply put, any water-related damage to your building that occurs because of your plumbing system, leaky roof, and other similar causes won’t be covered by commercial flood insurance.
It’s also important to note that commercial flood insurance won’t cover all kinds of properties in your building. Anything outside your property (even if that’s relevant to your business) won’t be covered. Likewise, commercial cars used for business purposes won’t be covered by commercial flood insurance even if they get damaged by floodwater. Note that commercial flood insurance won’t cover the financial loss you incur if your business stays closed for a long period due to the damage caused by flood.
Who Needs Commercial Insurance?
The commercial property insurance policy doesn’t cover the damage caused by floodwater, making it necessary for some businesses to opt for additional insurance. Commercial flood insurance offers protection against all kinds of water damage caused by floods. You should consider buying the policy even if your business is not located in a flood-prone area. Here’s when you should consider getting commercial flood insurance:
- You live in a place where the weather turns from snowy winters to warm springs. The speed at which the snow melts can have a significant impact on the likelihood of a flood.
- Your business is located in an area that receives heavy rainfall or heavy snowfall, which increases the risk of the flood.
Many business owners, especially startups and small businesses, do not consider commercial flood insurance, as that’s not a regular occurrence in their place. However, if a flood does occur, it can wreak havoc for your company, as it won’t just destroy the building, but everything inside it. There’s no denying it can result in a heavy loss. Besides, you should know that floods can be caused by a broken dam, a new construction in your area, and other changes that can affect the flow of water in your city.
Cost of Commercial Flood Insurance
The National Flood Insurance Program manages the cost of commercial flood insurance. Before quoting you the price, the insurance agent will inspect your property and check different factors, like how near it is to the lake or ocean, its elevation, and the location. The cost also differs depending on the type of coverage you choose. The age of the building, how prone it is to be affected by the flood, and the number of floors in your building will all affect the cost of commercial flood insurance. The areas associated with increased risk will pay higher commercial flood insurance premiums than those identified as low-risk properties.
Check the policy properly and review the coverage to see if the plan covers most damages caused by the flood before signing up. Buy it as a supplement to your business property insurance to ensure maximum building protection.