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Most business insurance policies don’t cover floods

Guthrie Insurance

When a flood strikes a business, the damage it causes comes from more than the initial deluge.

On top of wiping out inventories and destroying equipment, a flood disrupts normal business operations that are key to staying financially afloat.

Since most standard commercial property insurance polices don't cover flooding, it's important for any sized business to consider including flood insurance.

With 90% of all natural disasters involving flooding and in the US from 2007-2011 the average commercial flood claim was over $75,000. A substantial amount of money for a business to have to come up with on their own."

Nearly 40 percent of small businesses never reopen their doors following a disaster because just a few inches of water can cause tens of thousands of dollars in damage.

In the USA after Hurricane Sandy struck in October 2012, entire businesses were wiped out. Alhough the final figures are not yet in, Sandy produced billions in flood losses to businesses, according to the I.I.I.

In Ontario coverage for flood-caused damage to a business is generally available as an endorsement to an existing property policy from private insurance companies subject to each insurers particular terms. Due to the catastrophic nature of the losses involved deductibles generally tend to be higher than the standard policy deductible e.g $25,000.

The first step in securing flood insurance is to contact your insurance professional to discuss the specific needs of a business and the coverage options available.

A standard commercial flood insurance policy covers direct physical losses caused by flood as well as losses resulting from flood-related erosion caused by heavy or prolonged rain, coastal storm surge, snow melt, blocked storm drainage systems and levee or dam failure.

Some specific strategies for protecting a business during flood season:

Check with local government offices or commercial bank to see if your business is located in a flood zone. Ask around to find out whether a location has been flooded in the past. Knowing if a property is in a floodplain is critical to keeping people and property safe during a storm, as well as to properly insure the property.

Consider buying flood insurance. Flood insurance premiums are calculated based on a number of factors in addition to the flood risk to the structure, such as the year the building was constructed, building occupancy, number of floors, the location of the contents, the deductible chosen, and the amount of building and contents coverage a policyholder has purchased, among other things. Even on leased properties, business owners should consider purchasing flood insurance to cover any improvements made.

Include comprehensive coverage for commercial or fleet vehicles. Flood damage to commercial vehicles is covered under the optional comprehensive portion of a standard commercial auto insurance policy.

Don't wait. While some areas are more prone to flooding than others, no place is completely immune. Even in high-risk areas, many business owners wait until a flood is imminent before considering a flood insurance policy.

Businesses should always talk with their insurance professional regarding their flood risk and how to protect against it.

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