Many people are unaware that a standard commercial building policy will not provide coverage for a flood event. Flooding events are often considered a catastrophic event that can cause millions of dollars of damage, and unfortunately, there are few preventative measures that business owners can take to prevent flood damage.
Communities are often able to take some measures to redirect floodwaters and runoff in order to prevent large-scale damages, but even with these remedial measures, the damages that result from flood losses are still very great; too great, in fact, for private insurance companies to consider. Because private insurers refuse to accept the risks associated with flood damage in return for premiums, the Federal Government established the National Flood Insurance Program, which provides subsidies insurance products and programs with state and local governments to work toward flood prevention measures in their infrastructure.
Is Flood Insurance Necessary?
Flood insurance is not always required for a business owner, but if your home is located in a federally designated flood plain, your mortgage company may require that you carry flood insurance.
Flood insurance policies are issued as a separate product from your homeowner’s policy, and it has different coverages. There are special limits that apply, and there are specific definitions regarding what flood damage is, and what the policy will cover.
If you own a commercial building, the highest limit of coverage that you can obtain for your building is $500,000. It is important to understand the difference between your commercial building and your business personal property, because there is a separate limitation for damage to personal property in a commercial setting of $500,000.
Items that are covered under the building portion of your flood insurance policy will include the foundation, walls and roof of your building, but it will also cover fixtures, appliances and other items that are permanently attached to the building. Business personal property will generally include things like office equipment, machinery or even your stock.
Flood insurance has many special conditions and provisions, and more importantly, a flood insurance policy has specific duties of an insured in the event of a loss. Be sure to review your policy with an agent who is qualified to answer your questions and provide you with the best guidance for your commercial property.