Natural disasters are a fact of life, and for a small business, they can sometimes be the end of the road. Flooding hits business owners particularly hard, according to the Federal Emergency Management Agency (FEMA). The agency discloses that 40 percent of small businesses damaged by floods never reopen because the costs to recover are too high as most businesses do not carry flood insurance. 

A standard commercial policy or business owner’s policy (BOP) does not cover damage due to flooding. The main source of flood insurance coverage is issued by the federally-backed National Flood Insurance Program (NFIP), but it is also available through some private insurers. 

While UFG does not sell flood insurance, UFG Service Center Supervisor, Amanda Gilbreaith, suggests small business owners talk with their agents about options for flood insurance policies. 

“Our independent agents are experts when it comes to recommending options and their insureds should definitely talk with them about flood insurance,” says Gilbreaith. “Even though UFG does not write that type of coverage, they will have access to flood insurance solutions with other carriers and their agent will provide guidance easily.”
Who should consider flood insurance?

When it comes to what businesses should purchase flood insurance, Gilbreaithsays it depends on location. 

“In general, the location of the business correlates to coverage needed,” says Gilbreaith. “Any business located in a flood zone, in a region prone to hurricanes, or near rivers that overflow their boundaries during or following heavy rains and snow melt should all consider purchasing flood insurance as part of an overall insurance program. Mother nature isn’t concerned with how hard business owners work to maintain their business and be profitable so, they need to be proactive and look for opportunities that will help get them back up and running quickly after a flood.”

Gilbreaith also suggests that businesses who have flooded previously or have a basement that has flooded should also consider flood insurance options. 

While it may seem obvious that business in high flood risk zones should have flood insurance, businesses located in low risk flood zones aren’t necessarily 100 percent safe from the dangers of flooding. According to FEMA, 25 percent of all flood damage occurs in low to moderate flood risk areas. Floods can happen anywhere, arising quickly without much warning. Flooding is the most common natural disaster in the United States. For any small business, flood insurance should at the very least be discussed with an agent. 

What does flood insurance cover?

Flood insurance typically covers damage to your building and contents caused by flood. While coverages can vary, this generally includes losses as a result of: 

• overflowing rivers or streams.
• heavy or prolonged rain.
• storm surge.
• snow melt.
• blocked storm drains.
• broken dams or levees.

What does flood insurance not cover?

In general, flood insurance does not cover anything that is not part of your building or inside your building, such as:

• Property outside your building such as landscaping and septic systems.
• Damage to business vehicles. This may be covered under your business vehicle insurance.
• Financial losses caused by business interruption or loss of use of insured property.

What else should small business owners know about the NFIP?

• In order to purchase flood insurance through the NFIP, your business must be located in a community that participates in the program.
• Flood insurance through the NFIP is composed of two types of policies: one that covers the building structure and the other covers the building’s contents.
• There is a 30-day waiting period for new policies.
• Water must cover at least two acres or affect two properties to be considered a flood.
• It is likely you will be required to purchase flood insurance if your commercial property is located in a high-risk flood area, and if you have a mortgage from a federally regulated or insured lender.
• You cannot purchase flood insurance directly from the federal government. NFIP coverage can only be purchased through an insurance agent or company that participates in the NFIP. You can contact the NFIP at 888-379-9531 for an agent referral.

Flood insurance can be confusing for small business owners, so be sure to bring it up with your independent insurance agent when you’re discussing your BOP.

NOTE: The contents of this blog do not constitute any type of legal advice, nor does it fully cover all aspects of flood insurance. UFG merely wishes to advise you of flood insurance as an option to consider in order to help protect your business, and to encourage you to contact the NFIP for an agent referral should you wish to learn more about this program.