Debunking Flood Insurance Myths That Cost Business Owners Thousands

Flooding is one of the leading causes of catastrophic property and income loss for businesses in the United States—and one of the most misunderstood risks in commercial insurance. From retail and hospitality to manufacturing and professional services, many business owners assume their property or package policies provide flood protection. When a loss occurs, the financial impact can be severe.

For P&C agents serving commercial clients, correcting flood insurance myths is not only a coverage issue—it is a critical advisory function. AFR helps agents deliver clarity, protection, and confidence in these conversations.

Myth #1: “Our Commercial Property Policy Covers Flood Damage”

Standard commercial property and business owner's policies can include flood coverage, but this coverage is typically reserved for structures in very low-risk areas and can still have large deductibles. If a structure is located inside or near a high-risk flood zone, flood coverage is often excluded from the policy – regardless of whether flooding is caused by heavy rainfall, storm surge, or surface water. In some cases, flood coverage might be included for some flooding events and then excluded for others (i.e., storm surge). The deductibles for these higher-risk properties are typically $500,000 or more. This can often catch business owners unaware when flooding strikes. Even just a few inches of water can cause catastrophic damage to buildings and their contents. This can shutter businesses for months or shut them down completely.

AFR supports agents with commercial flood insurance solutions designed to align with real-world loss scenarios. Whether it’s primary limits, excess limits, or deductible buy-downs, AFR can assist.

Myth #2: “We’re Not in a High-Risk Flood Zone So We Don’t Need Flood Insurance”

This couldn’t be further from the truth. Flood zones are regulatory tools, not predictors of business interruption or financial impact. FEMA reports that about 30% of flood claims over the last 10 years occurred outside Special Flood Hazard Areas. Many commercial properties outside mapped high-risk zones still face significant exposure.

Agents can reframe flood insurance as a business continuity safeguard, not just a compliance checkbox. AFR helps agents offer flood solutions for properties across all flood zones.

Myth #3: “Flood Insurance Is Too Expensive for Our Business”

Business owners often overestimate flood insurance costs while underestimating flood-related losses. According to FEMA, the average flood insurance claim for a business exceeds $100,000. Uninsured flood losses frequently result in prolonged closures or even permanent shutdowns. FEMA estimates that 40% of small businesses never reopen after a disaster.

By comparing annual premiums to potential revenue loss, equipment replacement, and downtime, agents can shift the discussion from cost to survivability. AFR helps agents identify flood options that align with each business’s risk profile and budget.

Myth #4: “Federal Disaster Assistance Will Take Care of Us”

In actuality, federal disaster assistance for businesses is often limited, delayed, and provided as repayable loans, not direct compensation for losses. Business owners who rely on disaster assistance frequently face cash-flow gaps that insurance could have prevented.

Agents who clearly explain the difference between insurance proceeds and post-disaster aid can help clients make more informed decisions on their insurance needs. AFR equips agents with the expertise to position flood insurance as a predictable financial backstop.

Flood insurance conversations start with the right partner.

For business clients, flood insurance is not just about property; it is about continuity, payroll, contracts, and reputation. Agents who proactively address flood misconceptions:

• Reduce uninsured downtime
• Protect long-term revenue streams
• Strengthen trust with business owners
• Differentiate themselves as risk advisors

In today’s risk environment, flood insurance is a core component of responsible commercial risk management. AFR Insurance Services partners with P&C agents to deliver practical, compliant, and efficient commercial flood insurance solutions. With AFR, agents can confidently correct flood myths, protect business clients, and grow durable relationships built on expertise.

Learn how AFR’s flood insurance solutions help agents safeguard businesses before a loss occurs.