How to Choose the Right Commercial Flood Insurance Policy for Your Business

If you’ve ever wondered about the risk of flooding to your business and whether you need flood insurance, you're in the right place! Figuring out how to protect your business from floods might seem complicated, but it doesn’t have to be.

If you - or your lender - has determined that your property is at high-risk of flooding, then your lender will require flood insurance to protect both your business and the value of their loan.

And when disaster strikes, it can be catastrophic for businesses. For instance, between 2018 and 2022, flood-related disasters in the U.S. caused over $75 billion in damages. As extreme weather events become more frequent, the potential financial impact on uninsured businesses continues to rise. From loss of inventory to business interruption, the lack of adequate flood insurance can sink your business (literally and figuratively).

In this post, we’ll break down everything you need to know about choosing the right commercial flood insurance policy.

Understanding the Basics of Flood Insurance 

Flood insurance covers damage from water from an external source. In other words, your basic business insurance policy will cover water damage from internal sources – such as a burst pipe – you’ll need flood insurance to cover water damages from things like hurricanes, flash floods, swollen rivers and streams, and even failed dams and levees.

Commercial flood insurance is available both through the National Flood Insurance Program (NFIP) as well as the private market. Currently, the NFIP only provides coverage up to $500,000 for commercial property owners, but most businesses–with high insurable values–would likely face damages far exceeding this limit and – as stated previously – would also incur damage due to loss of inventory and business interruption.

Assessing Your Risk

By now, you’ve probably looked at FEMA’s flood maps, and it’s good to be informed about your business’ “on-paper risk.” But flood maps only tell part of the story. For starters, FEMA flood maps assess risk based on the property’s address (essentially where the mailbox sits). But if your property has buildings (or other valuables, such as vehicles) sitting at lower elevations, their risks may be considerably higher.

Second, the risks to your business also stem from things like local infrastructure and the ability of reservoirs, dams, and drainage systems to handle large amounts of water. Is your business (or neighborhood) surrounded by a large number of trees? Even clogged storm drains during fall’s foliage season can mean higher risk to your business.

The risk of flooding is also increasing. For 2024, the National Weather Service is currently predicting a season of storms that will be well above average in terms of both frequency and ferocity:

• 23 named storms
• 11 hurricanes
• 5 reaching major hurricane status (Category 3, 4, or 5)

Combined with the fact that more parts of the U.S. are sinking, and the risks become clearer. 

Coverage Options (and Limits)

Let’s get to the heart of the matter. The National Flood Insurance Program (NFIP) and private markets provide varying amounts of coverage at different price points, so it helps to be informed.

Currently, under the NFIP, the maximum amount of coverage for businesses is $500,000 in building coverage and $500,000 in contents coverage. In 2024, most businesses require (substantially) more, and that’s where the private markets come in. That’s because the NFIP: 

• Doesn’t Offer Business Interruption Coverage. And, in the event of major flooding, the interruption of business is what causes the most “damage” to commercial properties and business owners.
• Doesn’t offer coverage for Improvements, Betterments, and Excess Limits. 

One “limit” to be aware, though, is the waiting period on when coverage kicks in. Virtually all commercial flood insurance policies come with a standard 30-day waiting period, so business owners need to plan ahead rather than waiting until a flood is imminent.

Comparing Policy Providers 

Choosing between the NFIP and a private company like AFR Insurance Services involves more than just costs and coverage limits. It’s also about experience and customer service. AFR Insurance Services has been in the flood business since 1992, and we’ve underwritten more than 15,000 commercial flood insurance policies for businesses in all 50 states.

We know the intricacies of flood insurance like no one else, and we have the ability to underwrite policies for complex/customized policies as well as those for multi-dwelling properties. 

And when you have a question or a problem, you’ll be greeted by a real person (based in the U.S.) on the other end of the phone. 

Summing it Up

Business and property owners have options when it comes to flood insurance, and it’s important to know what makes one of those options the best for you. The most important considerations are to be: 

• Be prepared 
• Expect the unexpected 
• Protect your business and belongings from catastrophic loss

Let AFR Insurance Services quote your next commercial property for flood insurance. Discover how we can offer superior coverage for your clients at competitive prices.

Just click the button below, and if you don’t have a commercial property that needs a quote immediately, bookmark the link and come back when you do.