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Murphy Insurance2013-10-29 09:00:452024-07-23 14:15:36Hurricane Sandy One Year LaterCommercial property insurance typically does not cover damage caused by floods. To protect your business property in the event of a flood, you need Commercial Flood Insurance. Even if your commercial property isn’t in an area with a history of flooding, you still have some risk. In recent years, numerous severe rain storms have caused flooding in places where it’s never occurred in the past. It only takes a few inches of water to cause significant damage. If a flood damages your commercial property, the only way to have protection is to purchase flood insurance.
According to FEMA.org, approximately 25% of small businesses never reopen after a disaster, and the average commercial flood claim from 2014 through 2018 was more than $112,000.
What is a Flood?
The National Flood Insurance Program defines a flood as “a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from:
- Overflow of inland or tidal waters;
- Unusual and rapid accumulation or runoff of surface waters from any source;
- Mudflow; or
- Collapse of subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above.
What Commercial Flood Insurance Does and Doesn’t Cover
Depending on the coverage you have purchased, commercial flood insurance generally covers physical damage to your building or its contents “directly” caused by a flood. For example, damages caused by a sewer backup are covered if the backup directly results from flooding. However, if some other problem causes the backup, flood insurance does not cover the damages. Instead, you must purchase a special endorsement on your home policy called “water backup and sump overflow.” The National Flood Insurance Program (NFIP) offers coverage for business/nonresidential property commercial policyholders of:
- Building property – up to $500,000
- Contents of the business – up to $500,000
It’s recommended that tenants purchase both types of coverage. They should also consider flood insurance because regular renters insurance policies don’t cover damage to a tenant’s building improvements and contents caused by a flood.
Be aware that a Standard Flood Insurance Policy (SFIP) has exclusions including but not limited to not providing coverage for:
- Loss of Revenue or Profits
- Loss of Use
- Loss from Interruption of Business
- Additional Expenses Incurred While the Building is Being Repaired
Causes of Floods
You don’t need to live near a river, on water, or in a coastal area to be a flood victim. While the risk of flood varies depending on the area, often overlooked causes of flooding include:
- Heavy Rain
- Inadequate Drainage Systems
- Winter Storms and Nor’easters
- Hurricanes & Tropical Storms
- Snow Melt
- Failed Dams or Levees
- Construction Changing Topography
30-Day Waiting Period
A 30-day waiting period usually applies before the policy becomes effective. Don’t wait until a threat presents itself to purchase protection. The only exceptions to this wait period are:
- If a lender requires flood insurance in connection with making, increasing, extending, or renewing a loan.
- If a flood map revision requires an additional amount of insurance.
- If a lender determines that a loan that doesn’t currently have flood insurance coverage needs to have flood coverage.
Don’t Assume You Don’t Need Flood Protection
Consider these facts:
- Floods and flash floods happen in all 50 states.
- Floods are the #1 natural disaster in the United States.
- Over 25% of NFIP claims are from outside high-risk zones.
- A flood is 5 times more likely than a fire for buildings in high-risk flood areas during a 30-mortgage period.
- 90% of floods aren’t declared federal disasters, leaving the full cost of rebuilding up to the home or business owner. Flood insurance protects you whether or not a disaster is declared.
- From 2019-2023, the average flood claim amounted to nearly $69,000.
- In 2023, the average flood insurance policy premium was about $939 per year. Cost can vary substantially depending on property location.
- Homeowners in low- to moderate-risk areas may be eligible for the Preferred Risk Policy, with flood insurance premiums starting at $480 a year for $250,000 in coverage. Premiums for condominium and renter flood insurance are less.
- In 2022, NFIP paid over $2.4 billion in flood insurance claims to all policyholders.
- From 2013 to 2022, total flood insurance claims averaged nearly $1.5 billion per year.
Source: www.floodsmart.gov
Purchasing Flood Insurance
You cannot purchase flood insurance directly through the federal government. Flood insurance can only be purchased through an insurance agent. For more detailed information about flood insurance, visit the official website of the National Flood Insurance Program, www.floodsmart.gov to obtain a custom quote for commercial flood insurance.
NOTE: This information is only a general description of the available coverages and is not a statement of contract. All coverages are subject to all policy provisions and applicable endorsements. Some coverage may be subject to individual insureds meeting underwriting qualifications and to availability within a state. For further information, contact a Murphy Insurance Agency professionals.
Read Our Flood Insurance Blog Posts
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Murphy Insurance2013-10-29 09:00:452024-07-23 14:15:36Hurricane Sandy One Year Later
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Murphy Insurance2013-03-26 09:00:482024-07-23 15:45:08Lessons From Sandy…Get Flood Protection