At almost any time of year, floods can cause tremendous damage for small businesses. Whether it's a hurricane, severe rainstorms or even runoff from melting ice, flood risk can be a year-round problem for many companies - prompting the need to discuss the advisability of flood coverage with your insurance agent or broker.
According to the Federal Emergency Management Agency (FEMA), flooding is the most common cause of natural disaster damage in the United States. FEMA estimates that up to 40 percent of small businesses that experience significant damage following a natural disaster won't be able to reopen, highlighting the potential benefits of investing in flood insurance.
Flood related damage is excluded from commercial (and residential) property insurance policies, but is available as specific coverage from a variety of private insurers as well as the federal government's National Flood Insurance Program. In some high-risk areas, flood insurance may be mandated by lenders or landlords.
Understanding the Coverage
Flood insurance for commercial properties comes with three basic coverage options:
- The building only, which includes the building, foundation and its mechanical systems
- Building contents, such as furniture, office equipment and inventory
- Building and contents
Premium costs will vary according to the amount of desired coverage, previous flood activity in the area, your building's age, proximity to a river or lake, the floor your workplace occupies, and other factors.
Evaluating the Risk
One of the challenging aspects of evaluating whether flood insurance would benefit your company is that floods are very difficult to predict. Although flood risk is based on location and a history of previous flooding, other factors include rainfall, river flows, and recent landscape changes due to building construction. In fact, nearly 20 percent of flood insurance claims come from areas that were previously considered low to moderate risk.
Flood insurance policies have a 30-day waiting period, designed to prevent property owners or homeowners from purchasing coverage based on rising waters or forecasts of severe weather.