What does a Commercial Flood Policy Typically Cover?

August 2021

I’ve noticed a trend lately in my personal network, and I don’t think it’s exclusive to my inner circle. Increasingly, more of my friends and family are talking about flood insurance. Whether it’s my friend who is a Homeowners Association President of a condominium community in a Special Flood Hazard Area, or my best friend who is moving to Florida and purchasing a home in an X zone, flood insurance is on the top of everyone’s mind. While the Atlantic basin hurricane season began on June 1st, we are officially in the peak season of activity through the end of November. Combine this with the devasting flash flooding we just experienced in Tennessee, and the raging wildfires in the western region of our country, where the torched ground may not be able to absorb water after a rainfall, the threat of flooding is prevalent. Now think about this…who in your network, personal or professional, is a commercial property or business owner? Do they know what a commercial flood policy typically covers? We are here to help break down the basics of commercial flood insurance.

Let’s look at commercial building coverage first. Under the National Flood Insurance Program (NFIP), a commercial insured may purchase up to the maximum limit of $500,000 of flood insurance coverage for the Building, which may include the commercial structure and foundation, along with electrical and plumbing systems, water heaters, central air, furnaces, permanently installed carpeting, permanently installed paneling, machinery for operating pumps, awning and canopies, walk in freezers, outdoor antennas, fire extinguishers and sprinkler systems.

The second component of commercial flood insurance under the NFIP is Business Personal Property, also known as Contents coverage. A commercial insured may purchase up to $500,000 of flood insurance coverage for Contents, which can include furniture/fixtures, machinery and equipment, portable air conditioners, carpets and rugs not included in building coverage, certain valuable items, non-licensed self-propelled vehicles and up to 10% contents coverage for improvements made to building.

As you can see, this is a pretty extensive list of what is insured under a commercial flood policy for Building and Contents. And while you may be met with resistance if your friend, family member or client thinks they only need flood insurance when it’s required by a lender, ask them if they are in a position to repair or replace any of these above items if damaged by a flood. It’s so much easier to be proactive and educate on what a commercial flood policy can cover versus after someone experiences a devasting flood loss. Also, take into consideration that you may be able to obtain a flood endorsement to a commercial property policy, or approach a private market for commercial Building and Contents coverage. Some private markets offer replacement cost valuation, reduced waiting periods, loss of rents as an optional coverage and higher limits for both Building and Contents on a primary flood policy.

We continue to see commercial businesses impacted by flooding and it is more important than ever for agents and brokers to act in a consultative manner.
This article is provided for general informational purposes only and is not intended to provide any individualized legal or regulatory advice. Please refer to NFIP materials to learn more about the NFIP.  This article is provided for general informational purposes only and is not intended to provide individualized advice. All descriptions, summaries or highlights of coverage are for general informational purposes only and do not amend, alter or modify the actual terms or conditions of any insurance policy. Coverage is governed only by the terms and conditions of the relevant policy