About 730,000 commercial properties in the United States face an annualized risk of flood damage. That number will only grow. By 2052, structural damage from flooding will cost an estimated $16.9 billion per year.
As flooding worsens across the country, you may consider making flood insurance part of your business protection plan. But is it necessary?
If you value your business, the answer is “yes”.
To illustrate why, let’s take a look at what flood insurance is and how it differs from your standard commercial property insurance policy.
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What Does Commercial Flood Insurance Entail?
Commercial flood insurance is a specific type of policy designed to help your businesses recover from damages resulting from flooding. For companies that operate in flood-prone areas, getting the right policy is essential. It’s the surest way for a business to safeguard its assets and financial stability in the aftermath of a flood.
During a flood, your business location could sustain heavy structural damage. Assets like equipment can be damaged beyond repair. And you may lose significant inventory.
Commercial flood insurance can cover the cost to repair buildings and replace lost goods or assets.
How it Works
Flooding can do more than cause material damage. It can cause the kind of long-term disruption that many businesses can’t weather. Flood insurance can help lift those burdens off of a company’s shoulders.
The most straightforward way flood insurance can help is through the repair or reconstruction of buildings. Funds provided by the insurer can be used to repair flood damage, including structural components like roofing, foundation, walls, and electrical systems.
Funds can also go toward replacing lost or damaged goods. Severe flooding can wipe out thousands of dollars in equipment and inventory. Commercial flood insurance can help cover these costs.
Flooding can disrupt business operations for weeks or even months. That kind of interruption of business is unsustainable for many companies. While it’s not always included, some commercial flood insurance policies will compensate businesses for lost income.
Basic cleanup and restoration is another major expense after a flood. Supplemental insurance can cover the cost of removing debris, drying out buildings, and mold removal.
Last, an ounce of prevention is worth a pound of cure. To that end, insurance policies may cover the cost of installing flooding prevention measures. These can include sandbagging, temporary barriers, and sump pumps.
Any of these measures would present a huge burden if you had to pay them out-of-pocket. In severe cases, businesses could have to cut their losses and stop operations. Flood insurance can be the life-preserver that saves your business in an emergency.
Why Is It an Essential Part of Your Business Protection Strategy?
You may assume you’re already covered for flooding through your normal property insurance. But that’s not the case. Flood damage is not covered under most standard policies.
That creates a blind spot in your protection plan. Particularly if your business location is prone to severe weather.
You may also need coverage by law.
Many businesses have a mortgage through a government-insured lender. If one of these mortgaged properties is in a high-risk flood zone, owners must have flood insurance.
Local codes for building and zoning may also demand commercial property owners to carry flood insurance. Standards are stricter for companies that manage hazardous materials.
Because flood insurance is a condition for operating a business in many regions, the government and insurers are conscious of the price tag that comes with it. That’s why there are myriad opportunities to lower the cost of flood insurance for your business.
Commercial flood insurance can also help make your company a better part of the community.
We saw the havoc that prolonged supply chain disruptions can cause during the COVID-19 pandemic. Flood damage can likewise make it impossible for a company to conduct business.
Our business communities are interconnected. If one company shuts down because of flooding, it can have ripple effects on other businesses in the locality.
Making sure your company gets back on its feet as soon as possible makes you a better neighbor to live and work with.
What Will Your Business Coverage Look Like?
Flood insurance is a type of supplemental insurance. It’s meant to fill in the gaps and blindspots of an existing policy.
Your company protection insurance already covers common causes of property damage or loss. These can include fire, windstorms, and theft, among others. That it’s so comprehensive is why many people would assume it also covers flood damage.
Getting extra coverage for flooding fills in that gap.
These supplemental policies will cover multiple flooding scenarios. While hurricanes are one of the best-known causes, they’re far from the only ones. Flood insurance will also cover damage from broken dams or levees, overflowing rivers, and even melting snowbanks in cold regions.
There are some notable caveats to keep in mind.
For an incident to count as a flood, the flood waters need to cover at least two acres or affect two or more properties. By contrast, damage caused by rain getting in from a leaky roof or overflowing storm gutters would fall under the purview of standard commercial insurance coverage.
Property outside of a building is generally not covered, either. Landscaping or septic systems are two good examples.
By the same merit, standard flood insurance policies will usually not cover business vehicles. To protect those, you will need to purchase a comprehensive coverage policy through your auto insurance provider.
When you purchase a policy, there is a 30-waiting period before your policy will take effect. So avoid waiting until the last minute to try and get covered.
Protect Your Business Before the Waters Start to Rise
As climate change continues, we’ll only see an increase in severe weather events and the flood damage that comes with them. Making flood insurance a keystone of your business protection plan is an essential step to ensuring your company’s viability in the future.
Flooding and extreme weather aren’t the only challenges on the horizon. To stay one step of potential obstacles, check out our other business blogs for more tips and guides.
