Does Your Small Business Need Commercial Flood Insurance?


Does Your Small Business Need Commercial Flood Insurance?

Josh Beasley opened a gym in Houston that was devastated by Hurricane Harvey. He expects the cleanup and rebuild to cost $35,000.

Don’t think you have any need for commercial flood insurance for your small business?  Some statistics from the National Flood Insurance Program (NFIP) might change your mind. They report one inch of water can cost more than $20,000 dollars in damage and also 20 percent of flood claims come from outside the traditional flood zones.

It’s a better safe than sorry scenario. The Federal Emergency Management Agency  (FEMA) reports that 40 percent of small businesses ravaged by floods never reopen because costs without insurance are too high.



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Do You Need Commercial Flood Insurance?

Here’s what small businesses need to know about commercial flood insurance.

What is Flood Insurance and What’s Available?

Commercial flood insurance protects property owners from water damage to their properties. You can buy it for your small business from an agent or a company that participates in the National Flood Insurance Program or just rely on the government programs.

Remember that your business must be located in a community participating in the National Flood Insurance Program to qualify for government funding. Look your location up here. There’s typically a 30 day waiting period for these new policies. In other words, you need to get the wheels in motion well before a storm that can flood your business is imminent. 

What the SBA Can Do

There’s also some help available from the U. S. Small Business Administration (SBA) in the form of disaster loans. The SBA can hand out $25,000 and you don’t need collateral. However, there’s a cap on business loans of $2 million for replacement and repair of property. A presidential disaster declaration triggers the release of these funds from the SBA.

Remember these are loans and you need to pay them back. The FEMA grants don’t need to be paid back. The best route for the most money is a claim against the flood insurance you get with a private carrier.

What Add-ons are Needed

Making sure you’ve got the right coverage means looking into the differences. Some business owners policies don’t cover floods. Look for participating carriers that have commercial policies covering floods over and above the damages paid for by  any government programs. 

What’s Covered?

Don’t make assumptions about what’s covered and what isn’t, whether by government programs or by your own commercial flood insurance.  For example, lost productivity and sales are not covered.

Who Needs It?

What you pay for flood insurance depends on where your business is.  FEMA puts out Flood Insurance Rate Maps (FIRMs) that will let you know if you’re in Special Flood Hazard Areas. If your business is in one of these places, you might qualify for a referred Risk Policy (PRP).

What Goes Into the Cost

There are several other factors that go into determining how much you’ll pay for one of these policies. For example, there’s the Base Flood Elevation that measures the estimated high water marks for flooding in your area.

Why You Need to Renew

Small businesses shouldn’t let their flood coverage lapse. You can lose any savings because the higher cost options kick in when policies are rewritten. FEMA considers a policy lapsed if your business switches to a non-National Flood Insurance Program policy.

Flood Photo via Shutterstock

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Rob Starr


Rob Starr Rob Starr is a Staff Writer for Small Business Trends. Rob is a freelance journalist and content strategist/manager with three decades of experience in both print and online writing. He currently works in New York City as a copywriter and all across North America for a variety of editing and writing enterprises.

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