The Complete Guide To Flood Insurance

Flood insurance is something many business owners and homeowners overlook until it’s too late.

Changing weather patterns worldwide could mean that flooding becomes a frightening and expensive possibility in the future no matter where your business may be located.

Don’t wait until it’s too late to look into flood insurance. While your business is safe and your floors dry, now is the time to learn what flood insurance is, how much it costs, how to use flood insurance following a natural disaster, and if you should lock in a flood insurance policy as soon as possible.

What Is Flood Insurance?

Flood insurance is a specialized type of property insurance available to both businesses and homeowners.

Flood insurance typically covers structural damage and property damage resulting from the presence of water on land that is normally dry.

You may be able to add flood insurance to your existing property insurance policy. You may also be eligible for the government’s National Flood Insurance Program, if you live or work in a participating community.

How Does Flood Insurance Work?

After a flood damages your business or home, you may face a daunting cleanup project in addition to damaged inventory and equipment and structural damage ranging from the cosmetic to the severe. Flood insurance won’t solve all your problems, but it will make your flood recovery easier by helping you pay to get your business or home back to normal.

If you need to file a claim, you’ll find the process works similarly to any other type of insurance claim. In fact, because you can purchase flood insurance from the insurance company that already protects your property, you may be able to begin your claim by talking to a familiar insurance agent.

Other Insurance That Covers Flooding

Are there ways besides flood insurance to obtain coverage for the damage rising waters can do to your property and belongings? Unfortunately, for most, the answer will be no. That’s why it’s so important to decide if you should purchase flood insurance before the waters start to rise and threaten you.

Property insurance policies typically specifically exclude damage caused by floods. FEMA defines a flood as a general, temporary condition of partial or complete inundation of two or more acres of normally dry land or of two or more properties resulting from an overflow of inland or tidal waters, an unusual and rapid accumulation of surface waters from any source, mudslides caused by flooding, or the collapse of land along the shore of a body of water caused by currents or waves exceeding anticipated cyclical levels.

Note that this definition of a flood does not apply to damage that can result from a different kind of “flood,” such as a burst pipe in your building. That type of water damage is not considered a true flood and likely would be covered under your property insurance policy.

So what happens if your building is engulfed in floodwaters and you aren’t protected by a flood insurance policy? You won’t be left entirely on your own. You may be eligible for government aid through FEMA if your area has been declared a major disaster. Similarly, you may be eligible to apply for a Small Business Association disaster loan to help you rebuild your business after a flood.

Organizations like the Red Cross often provide disaster assistance such as medical care, food, and shelter that can help you in the immediate aftermath.

What Does Flood Insurance Cover?

Flood insurance provides two kinds of coverage: building and contents. These may be combined under one policy, or you may need separate plans.

Talk with your insurance agent to determine your options.

What Flood Insurance Building Coverage Means

According to the information FEMA provides, you should expect flood insurance building coverage to protect:

• Electrical and plumbing systems
• Furnaces and water heaters
• Home appliances like refrigerators, cooking stoves, and dishwashers
• Permanent carpeting, cabinets, paneling, and bookcases
• Window blinds
• Foundation walls, anchorage systems, and staircases
• Detached garages
• Fuel tanks, well water tanks and pumps, and solar energy equipment

What Flood Insurance Contents Coverage Means

Flood insurance contents coverage protects your personal property inside the insured building. Here are some examples:

• Personal belongings, including clothes, furniture, and electronics
• Curtains
• Microwave, clothes washer, and dryer
• Portable and window air conditioning units
• Non-permanent carpets
• Valuable items such as artwork (limits apply)

What Flood Insurance Does Not Cover

When it comes to flood insurance, the source of the water matters. Even though the damage may look similar, you should not expect a flood insurance policy to protect you from wind-driven rain or hail, for example. Your property may be flooded by a backed-up sewer or by broken water pipes, too.

Unless the damage to your property is specifically related to a flood that meets FEMA’s definition, you won’t be able to activate your flood insurance policy to cover the damages.

Remember, FEMA defines flooding as a general and temporary condition that causes normally dry land to be partially or completely inundated by water. Two adjacent properties or more than two acres must be affected. (If your flooding isn’t part of FEMA’s definition, you aren’t out of luck. The good news is that your property insurance policy may cover water damage caused by a backed-up sewer or broken pipe. Check with your agent for details.)

Items expressly excluded from flood insurance coverage may include the following:

• Living expenses while the building is unsuitable for occupation
• Property outside the insured building, such as landscaping, septic systems, fences, decks, and patios
• Financial losses caused by business interruption
• Currency, precious metals, stock certificates, and other valuable papers
• Cars and other self-propelled vehicles and their parts
• Personal property kept in basements

Who Needs Flood Insurance?

It’s a myth that the only people who need flood insurance are those living in known flood zones. No matter where you live or work, you’re probably at some degree of risk from flooding, under the right circumstances. In fact, according to FEMA data, around 25% of flood claims each year come from people living outside a known flood zone!

The trick is to balance your risk of flooding against the cost of flood insurance. Although you can’t foresee every potential for flooding, you can start by assessing your risk. Visit FEMA’s Flood Map Service Center and enter your address, general area, or exact longitude to assess your risk of flooding.

Again according to FEMA, if you find that you live in an area with low or moderate flood risk, you are five times more likely to experience flood than fire over the next 30 years. You likely wouldn’t feel comfortable going without insurance to cover your building in case of fire, would you? Flood insurance may be even more important for protecting your property. The flood insurance cost may be a good investment.

How Much Does Flood Insurance Cost?

You’ve decided to get flood insurance. Great move! The next questions are, how much is flood insurance, and can you fit the coverage you need into your budget?

The average flood insurance policy costs around $700 per year. When you compare that to the $52,000 average flood claim payout from the National Flood Insurance Program, it seems like a good investment, doesn’t it?

Of course, like all insurance policies, the price you’ll pay for flood insurance can depend on a number of factors, including your building’s age, its construction type, and your area’s flood risk zone. You may be able to decrease the cost of your flood insurance policy by taking steps such as installing floor drains or elevating your structure.

Another way to lower the cost of your flood insurance is to increase your deductible or the amount you pay out of pocket before your policy starts to pay following a flood. Raise your deductible to the maximum of $10,000, and you could lower your annual premium by as much as 40%.

You can set different deductibles for your buildings and content coverage.

How To Get Flood Insurance

Wondering how to get flood insurance for your home or business? You can purchase a flood insurance policy from thousands of insurance agents working at 50 insurance companies nationwide. That could include the insurance agent you’re already working with on other policies, like your general liability insurance, property insurance, or your business owners policy (BOP).

If you live in a participating community, you may be able to purchase a federal flood insurance policy through FEMA’s National Flood Insurance Program.

If you’re not sure where to start, FEMA has the resources to help. Start by using FEMA’s flood insurance provider locator to find an agent who can help you set up a flood insurance policy. Simply select the name of your state, and you’ll see a list of providers covering your area, complete with a phone number to make it easy to make contact you.

How To File A Flood Insurance Claim

If your property is affected by a flood, report your loss immediately to your insurance agent or the carrier for your flood insurance policy.

An insurance adjuster will be assigned to assess flood damages, either remotely or in person. You can, and should, protect yourself by taking photos or videos of the damage the flood caused to your property.

Because most flood insurance policies will not cover damage from mold in most cases, it’s a good idea to start the cleanup as soon as the damages have been documented. Take photos and videos of both the affected structures and your personal property before you throw away or dismantle anything.

Record the serial numbers for all equipment and appliances, and keep receipts whenever possible. As soon as you’ve documented the damage, throw away items that pose a health risk, such as perishable food and wet clothing and fabrics that could start to mold or mildew.

Flood Insurance: The Bottom Line

Flood insurance can’t protect you or your property from rising waters. But it can help you recover from the damage more quickly and with less of a hit to your bank account.

It’s a good idea to review your insurance policy periodically. Contact your agent and ask to update your business property insurance and discuss adding flood insurance coverage.

If you’re currently dealing with the aftermath of a flood affecting your property, you can start the process of acquiring flood insurance now. Your coverage won’t kick in for 30 days, however, and it won’t cover any damages you’ve already incurred.

Although you’ll definitely want to add flood insurance as soon as you’re able, you might also want to look into obtaining a small business disaster relief loan from the Small Business Association. A loan can help you recover this time, but don’t put off purchasing a flood insurance policy to protect yourself before the next rainy day comes around.

Flood Insurance FAQs