In 2017, total insured losses due to natural disasters were approximately $78 billion.
Of those, floods and flash floods accounted for $100 million. Considering the billions of dollars of damage they cause every year, buying flood insurance is a worthwhile investment.
As the number of floods increases, the risk of damage to your property and business operations also increases. Flood insurance protects your assets and can be quite affordable.
But there are more reasons than those to buy flood insurance for your business. Keep reading to find out what they are.
8 Reasons Your Business Needs to Get Flood Insurance
There’s more than 1 reason that you should be buying flood insurance for your business – there’s 8. We’ve detailed each of these below.
1. Conventional Insurance Doesn’t Cover Floods
It’s likely that your standard business insurance doesn’t cover the damage caused by floods. Commercial Package Policies and Business Owners Policies cover water that comes from above. If your inventory gets damaged by an old, leaky roof or rain coming in from overflowing gutters, then you’ll receive compensation.
However, if your property damage is the result of water coming from the ground, you’ll pay from your own pocket. To cover damage that comes from a river, creek, storm surge, or flash flood, you have to purchase separate flood insurance.
2. Flood Insurance Protects Your Property
Flood insurance ensures that all of your property is covered in the case of a flood. It protects against damage caused by rising water, overflowing storm drains, and storm surges. And flood insurance covers you even if the flood wasn’t declared a federal emergency.
Your policy covers almost all of your business property, including floors, walls, equipment, fixtures, furniture, inventory, and ceilings. Without flood insurance, you have 2 options: take a low-interest disaster relief loan that has to be paid back or pay for the damage to your property from your own pocket.
3. You May be Required to Have Flood Insurance
In some cases, you may be required to have flood insurance. Federally regulated and insured mortgage lenders require businesses in high-risk flood zones to purchase flood insurance.
Weren’t required to have flood insurance when you purchased the property? Flood maps change. It’s possible that you’ve been moved into a risk area and require flood insurance now.
Check the Flood Insurance Rate Maps (FIRMs) to determine whether you need flood insurance.
4. You’re Not Safe from Flooding Outside of a Risk Zone
While FEMA does their best to provide updated and accurate maps, flood zones change often.
In fact, 20% of all National Flood Insurance Program (NFIP) claims are filed by property owners that live outside of high-risk flood areas. Regardless of where your business falls on a flood map and if you live close to a shoreline, nobody is safe from the devastating damage that flooding can cause.
5. Your Warehouse Layout Is at Risk During a Flood
Some businesses are at more of a risk for flood damage than others simply because of how their warehouse and inventory is set up and stored. If you can move your equipment and inventory quickly and into a safe space, you may be able to mitigate damage. If you keep your inventory on the ground level and can’t move it quickly, it’s more likely to be damaged during a flood.
However, in the case of a flash flood, it might not matter how easy it is to move your property. Flooding can also cause structural damage that you can’t protect against even if you have sandbags and reinforcements. With flood insurance, all those items would be insured – and you wouldn’t be stuck scrambling to move inventory and equipment when the time comes.
6. Floods Are Catastrophic
Floods are the most common natural disaster in the US. They cause billions of dollars in damage every year and that number is only increasing. Much of this damage is catastrophic and would be difficult for most businesses to cover without flood insurance.
7. Flood Insurance Is Affordable
Flood insurance purchased is affordable. It can be purchased through the National Flood Insurance Program. The program is administered by the federal government and they offer two policies for businesses.
The standard policy is for businesses in high and undetermined risk zones. These policies cover your building and the contents of the building separately. You’re covered for up to $500,000 on each, with deductibles up to $50,000.
The Preferred Risk Policy is for businesses in moderate to low-risk flood zones. These policies cover the building and its contents under 1 policy. It has the lowest premiums of any NFIP policy.
8. Your NFIP Coverage Isn’t Enough
In some cases, the coverage provided by NFIP isn’t enough. They may not cover everything you need to be covered, including:
- Property outside the building
- Equipment outside the building
- Septic systems, trees, cisterns
- Damage caused by earth movement (i.e. a sinkhole or mudflow)
- Damage to business vehicles
The NFIP also doesn’t cover amounts that exceed $500,000 for your building and its contents. And if you have to close up shop while you make repairs, the NFIP doesn’t cover your losses.
When NFIP coverage isn’t enough, consider purchasing flood insurance from a private provider. They can act as an extension on your NFIP property or you can purchase it alone. Learn more about that here.
Is Your Business Safe From Flooding?
Floods are the most common and one of the most expensive types of natural disasters in the US. As our climate continues to change, the likelihood of floods increases across the US – in flood areas and non-flood areas alike. That’s why you’re taking a big risk if you don’t already have flood insurance.
Flood insurance protects your business property in the case of damage caused by flash flooding and storm surges. It ensures that you’re not left paying for catastrophic flood damage out of your own pocket.
And for more tips and advice on homes, real estate, and property, check out our blog.