Flood insurance is a business owner’s best protection against the financial losses of flooding for several reasons:
- Anywhere it can rain, it can flood.
- Flood damage isn’t typically covered by standard commercial property insurance.
- FEMA offers disaster relief only for individuals -- not businesses.
- The Small Business Administration’s disaster loans are available only when damage results from a presidentially declared disaster.
The National Flood Insurance Program (NFIP) offers coverage for commercial buildings and commercial personal property, with up to $500,000 in coverage for each type of policy. The value of flood damage is typically based on Actual Cash Value for losses to an insured building and property—or the cost to replace an insured item of property at the time of loss, less the value of its physical depreciation.
What’s Covered by a Commercial Building Policy
- The building and its foundation.
- Building equipment and systems, such as electrical, plumbing, water heaters, HVAC equipment, pumps, and fire extinguishers and sprinkler systems;
- Fixtures and surfaces that are permanently attached, such as awnings and canopies, outdoor antennas, walk-in freezers, and permanently installed carpeting, paneling, wallboard, bookcases, and cabinets.
- Furniture and fixtures, machinery and equipment, and other personal property owned by the policyholder and used in the business;
- Stock (merchandise held in storage or for sale, raw materials, and in-process or finished goods).
What’s Covered by a Commercial Personal Property Policy
- Furniture and fixtures, machinery and equipment, and other personal property owned by the policyholder and used in the business;
- Stock (merchandise held in storage or for sale, raw materials, and in-process or finished goods);
- Items that are portable or not permanently attached, such as portable and window air conditioners, microwave ovens, dishwashers, carpets and rugs;
- Clothes washers and dryers, food freezers (other than walk-ins) and the food in them;
- Certain valuable items such as original artwork and furs (limited to $2,500 in total);
- Non-licensed self-propelled vehicles, if stored inside the insured building and used for the business (e.g., tractor) or to assist a person with a disability;
- Up to 10% of contents coverage for improvements made to a building the policyholder occupies as a tenant.
What’s Not Covered Under NFIP Commercial Building or Personal Property Policies
- Financial losses caused by business interruption or loss of use of insured property;
- Damage caused by moisture, mildew, or mold that the property owner could have avoided;
- Damage caused by sewer or drain backup, unless a flood in the area caused the backup;
- Currency, precious metals, and valuable papers such as stock certificates, scrip, and recorded data;
- Property and belongings outside of insured building, such as trees, plants, wells, septic systems, walkways, decks, patios, fences, seawalls, hot tubs, and swimming pools;
- Most self-propelled vehicles, such as cars, including their parts.
Learn more from the NFIP’s Summary of Coverage for Commercial Property.