Does My Business Insurance Include Flood Coverage?

(Find out what your policy covers and what it doesn’t)

Business Flood Insurance

Responsible business owners want to protect against all potential disasters, even the natural kind. That being said, you might not be entirely sure what all is covered under your policy. For example, does your business insurance cover flood damage? The good news is that we know, so you don’t have to.

Independent insurance agents know all the ins and outs of business insurance and flood coverage too. They know exactly how to get your business protected against all kinds of catastrophes, and which coverages get the job done. But first, here’s a deep dive into business insurance and flood coverage.

Does My Business Property Insurance Cover Flood Damage?

Unfortunately, there are two main perils that business insurance does not cover — earthquake damage and flood damage. In order to protect your business property from floods, you’d need a special, separate flood insurance policy. Flood insurance policies are only available through the National Flood Insurance Program (NFIP), which is a part of the Federal Emergency Management Agency (FEMA).

Business owners in high-risk flooding areas may be required by their commercial mortgage lender to purchase a flood policy to protect their property. However, even if it’s not required, business owners may still want to seriously consider getting flood coverage. Flood damage can be expensive to the point of causing bankruptcy without the proper protection.

If I Work from Home, Should I Add Flood Insurance to My Policy?

Possibly. If you run a business out of your home, there’s even more of an incentive to purchase flood insurance. However, this decision will likely be based on where you’re specifically located. If you live along the coast or in an area otherwise prone to flooding and aren’t already required to have flood insurance, you’ll probably want to seriously consider getting it.

Not only will flood coverage help pay to repair or rebuild your home or replace lost or damaged personal property, if you run a home business, it’ll pay for damages to that too. Business property can be much more expensive than other personal property stored within the home, so if you live in a flood zone and also have a home business, it makes sense to get flood coverage. Paying to replace expensive property like computers out of pocket could be a real hassle.

What Protection Does Flood Insurance Offer?

Just like homeowners and business owners policies, flood insurance was created to help protect your home or business structure and the stuff inside it. Flood insurance is extremely important in areas prone to natural disasters that bring a lot of water, such as hurricanes and tsunamis. These policies fill the crucial coverage voids of both homeowners and business owners insurance.

Flood insurance is designed to cover the following:

  • Damage to/loss of your home or business: Known as “structural coverage,” this includes the foundation of the building (also known as the “dwelling”), electrical systems, indoor plumbing, built-in appliances, and additional flooring installed, like carpeting. Detached structures like sheds are often covered as well.
  • Damage to/loss of your stuff: Known as “contents coverage,” this includes furniture (built-in and free-standing), smaller/not built-in appliances, some food, valuables, and clothing. For businesses, this often includes inventory.

However, keep in mind that some flood insurance claims will only pay reimbursement for your property up to its current value; and any depreciation will be factored in. Certain flood claims will pay for the full replacement cost of the items, though.

What Are Other Benefits of Flood Insurance?

Obviously, flood insurance’s main benefit is to protect against damage caused by natural floodwaters. However, there are a handful of important benefits to having a flood insurance policy, including:

  • Protection for your home or business’s structure: Flood insurance policies provide protection against property damage to homes and businesses that’s caused by flooding.
  • Protection for your belongings or inventory: Flood insurance covers flood damage to your personal belongings or business inventory stored inside the structure.
  • Protection against bankruptcy: Flood insurance helps businesses stay afloat following a disaster and allows homeowners to rebuild/repair and keep their home.
  • Protection that other policies exclude: Flood insurance fills the void left by standard homeowners and business owners policies across the country, which exclude coverage for damage by natural floodwaters.

Since flood damage can be so expensive, it’s beyond critical to have a policy that provides this important coverage if you live in an area that’s prone to flooding or the natural disasters that cause it.

Is Flood Insurance Tax Deductible?

Fortunately for business owners, the answer is yes. Flood insurance premiums are tax deductible for business owners, but unfortunately not for individual taxpayers. If you run a home-based business, you’ll more than likely want to add flood coverage to your business insurance if you want to be able to deduct your premium, rather than to your homeowners policy. If you don’t already have business insurance, it’s a really good idea to look into that, too.

What Does Business Insurance Protect Against?

Business insurance is important to consider no matter where your office is based. It provides important coverage for you as the owner as well as the actual building and your property.

Standard business insurance policies provide the following major coverages:

  • Protection of your stuff: This includes your personal property, equipment, and your office building against things like theft, vandalism, and other damage.
  • Protection from legal consequences: If any aspect of your business causes damage or bodily harm to a customer, you could be sued.
  • Protection from mistakes: Should you or your employees make a professional error that causes physical or emotional harm to the public.

In addition to its main protections, business insurance also typically covers the following perils:

  • Fire and smoke
  • Lightning
  • Explosions
  • Windstorms and hail
  • Aircraft or vehicle damage
  • Riot or civil commotion
  • Vandalism
  • Sprinkler leaks
  • Building collapse
  • Volcanic action
  • Certain types of water damage

Obviously, flooding isn’t the only peril your business needs protection against. Work with your independent insurance agent to ensure that your corporate brainchild gets set up with all the coverage it needs to make you feel safe and secure.

What Other Coverage Add-Ons Should I Consider for My Business?

Aside from protecting your business against flood damage, there are many common threats that you should also consider coverage for. Your independent insurance agent can help you brainstorm all the ways you need to guard your business from possible catastrophe. It’s important to assemble a business insurance policy that addresses all your areas of concern.

Common optional add-on coverages to business insurance include (but are not limited to):

  • Crime insurance: This covers losses due to criminal activity such as theft or fraud. Coverage even applies to employees who steal from the company.
  • Business income: This covers the financial loss suffered while a business is closed due to fire damage or other disasters.
  • Cyber risk & privacy liability: This covers the loss or theft of customers’ sensitive data, including credit card numbers and more. This coverage can also save your business in the event a deposit or money transfer is intercepted by cybercriminals.
  • Professional liability:  Also known as "errors and omissions insurance," this coverage protects against claims made by clients who have suffered financial loss due to the work they've hired you for. This coverage is crucial for those who offer advice or consulting as part of their services.
  • Boiler & machinery: Also known as "equipment insurance," coverage applies to electric equipment in the building (e.g., AC units and boilers) that breaks down due to power surges, etc. Property insurance may cover this stuff, but not always.

The more complex your business, the more coverage it’ll require. Again, your independent insurance agent will know how to patch any holes in your coverage.

Here’s How an Independent Insurance Agent Would Help

When it comes to protecting your business or home against flood damage, no one’s better equipped to help than an independent insurance agent. Independent insurance agents search through multiple carriers to find providers who specialize in homeowners, business, and flood insurance, deliver quotes from a number of different sources, and help you walk through them all to find the best blend of coverage and cost.

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TrustedChoice.com Article | Reviewed by Paul Martin

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