As many entrepreneurs know, life is unpredictable. Businesses need to be able to pivot, adapt and bounce back quickly after setbacks, including natural disasters. Flooding is the most common natural disaster in the U.S. and can be caused by anything from hurricanes to levee breaches to rapid snow melt. Flood damage can be incredibly expensive to repair, so organizations with brick-and-mortar operations cannot afford to be vulnerable in the face of this threat.
Proactively purchasing commercial flood insurance will help you remain financially resilient in the face of adversity—but what exactly is it, and how does it work?
What is commercial flood insurance?
Commercial flood insurance is insurance coverage that helps protect your business from flood damage. It covers your business’ physical premises, as well as the contents inside. Some policies may also cover financial losses stemming from business interruption.
What does it cover?
Commercial flood insurance helps cover repair costs if your business experiences damage from floodwaters.
Depending on your policy, commercial flood insurance covers nearly all components of your business’s physical space, including:
- Electrical systems;
- HVAC systems;
- Permanently installed carpeting;
- Permanently installed cabinets, paneling, and bookcases;
- Foundation walls and anchorage systems;
- Fuel tanks, well tanks, and pumps
Depending on your policy, commercial flood insurance also covers nearly all the contents inside your business, including:
- Computers and electronics;
- Office equipment;
- Personal property, including clothing and uniforms;
- Curtains and other window coverings;
- Portable and window air conditioners;
- Carpets that were not included in-building coverage, such as area rugs or carpeting installed over wood floors
Importantly, commercial flood insurance only covers damage caused by an excess of water or mudflow on normally dry land, and the flooding must affect at least two acres of land or two or more properties. It does not, for example, cover water damage from plumbing backups that were not caused by outside flooding. It also does not cover business property outside your company’s building, business vehicles, or official paper documents.
How do I know if I need it?
Flooding can occur anywhere. It’s not just restricted to coastal areas or tidal/river basins, and flooding regularly occurs outside of FEMA’s high-risk flood zones. From 2014 to 2018, according to FEMA, policyholders outside of high-risk flood areas filed over 40 percent of all National Flood Insurance Program (NFIP) flood insurance claims. Catastrophe modeling companies such as CoreLogic regularly release estimates of how much flood damage will be done annually to uninsured properties with no flood coverage—as of 2020, it’s in the hundreds of millions of dollars, and it’s only getting worse every year.
In many states, business owners will have to purchase commercial flood insurance as a separate policy, because like with homeowners’ insurance, standard business insurance policies usually exclude flood coverage.
You may be legally required to have a separate commercial flood insurance policy if:
- You have a mortgage for your business’ property from a federally-regulated or insured lender; and
- Your business is located in an area defined as high flood risk by FEMA.
Even if your business doesn’t meet these criteria, there are several reasons it is smart to purchase commercial flood insurance, such as:
- Your business is in an area that experiences moderate to high levels of rainfall, which can swell streams and sewers and quickly cause flooding—as we saw during Hurricane Harvey in Houston, this can be devastating;
- Your business is located in a highly urban environment-–outdated flood maps will not reflect more recent construction development and your area may be vulnerable to urban flooding despite being officially mapped to an outdated lower hazard flood zone;
- Your business has a basement that could flood from construction runoff or other external causes;
- Your business is in an area with cold, snowy winters and warmer springs—commercial flood damage is often caused by fast-melting snow.
Why buy commercial flood insurance from Palomar?
Palomar provides a wide range of specialty commercial property insurance products, including commercial flood insurance. Our granular underwriting model allows us to assess a property’s flood risk on a lot-by-lot basis, rather than the broad zones used by other major insurance providers. This allows us to provide affordable, highly customizable policies that are exactly right for your business. Further, our underwriting process allows us to offer much higher coverage limits compared to other insurance providers. The standard maximum commercial flood building limit is $500,000, but Palomar offers coverage limits up to $15,000,000. Purchasing flood coverage through Palomar reduces your risk of being underinsured.
Additionally, even though we are a nationwide insurer, our underwriting is based on your business’ exact geographic location. This ensures that your premium is specific to the risk at your business and is not inflated or used to subsidize higher-risk properties in more flood-prone areas.
Palomar wants to help you protect your business even before a flood occurs. Our commercial flood policy includes coverage for loss avoidance measures—we will pay up to $1,000 for the costs you incur to protect your insured building from an imminent flood, including sandbags, supplies, and labor. Our policy also allows for reduced premiums if you have implemented flood mitigation measures, such as installing flood vents or barriers.
We are here to help your business remain economically resilient in the face of mounting environmental challenges in a rapidly changing world. To learn more about commercial flood insurance through Palomar, please visit: https://plmr.com/commercial-flood/