There are many things to keep in mind when deciding on a commercial flood insurance provider. Make sure to ask these essential questions before deciding.
Before you seal the deal, many considerations exist, whether buying a new building or using it as an investment. One of these considerations is a building’s flood risk.
If you don’t know the flood risk, you may be powerless to protect yourself financially. After all, should flooding damage your property, you need somewhere to turn. That’s where flood insurance comes in.
But not all coverage is created equal. Before you buy, you need to know how to choose the suitable range at the right price.
Keep reading for a guide on essential questions when buying commercial flood insurance.
Is Flood Insurance Necessary?
After finding out your building insurance doesn’t cover flood damage, you might want to get coverage for it. But before you jump into that, it’s best to see if you need it in the first place.
One way to assess if you need commercial flood insurance coverage is by checking the condition of your location. Does it flood often? Do you usually experience stormy weather?
If so, it’s best to get insurance for storm preparation. Otherwise, you may be able to get by without it.
Another point to consider is your level of risk tolerance. You might be buying flood insurance only to find out you won’t be using it in the next year or more.
It might make you feel like you’re paying for a service for something you won’t use. But knowing you have coverage can give you peace of mind if something happens.
So, do a quick cost/benefit analysis. Think of the chances of floods occurring and what potential damage they can cause. That way, you can determine whether it’s worth the cost.
Does Your Mortgage Require It?
If you’re buying a building in a flood zone, your mortgage lender will likely require you to get flood insurance. It also applies when you live in those areas.
The federal law also requires it for anyone with a government-backed mortgage in high-risk flood areas. If your establishment is in moderate to low-risk flood areas, flood insurance is unnecessary unless your lender says so.
Sometimes, a location may not experience flooding often but does so with extreme weather conditions. You might still want to consider buying commercial flood insurance if the weather causes severe floods.
What Does Flood Insurance Cover?
Commercial flood insurance usually covers your establishment from damage caused by flooding or rising waters and mudflows. If the issue is a landslide, most companies consider it a particular concern.
The coverage you get from flood insurance varies based on the property you own. It can go from $100,000 to $250,000 for residential homes and up to $500,000 for businesses.
It can cover cleanup, removal of debris and mold (from water or mud), and structural repairs. Note that it won’t pay for all repairs. The damage must be due to flooding or mudflow.
What Does It Not Cover?
Now that you know the coverage, what exactly does it not cover? The insurance won’t cover damage that goes over $500,000.
It also doesn’t include damage to some parts of the building. These include areas below ground level, walkways, pools, and decks. As for the basement, it will likely only cover essentials like your HVAC.
You can also get flood insurance coverage for your belongings or valuable items such as art, antiques, jewelry, and more. Just note that these also have limitations.
You may have to check with the company to see their commercial flood insurance scale.
What Are the Exclusions?
There are some instances where you don’t fall under flood insurance coverage. If you’re a policyholder, you might want to take note of these.
This includes damage or loss from earth movement or earthquakes. Under this are landslides, sinkholes, erosion, and the like.
Flood insurance differs from typical building insurance because it doesn’t offer temporary expenses. If you choose an insurance company, clarify the conditions for commercial flood insurance exclusions.
There may be situations where you could interpret the items differently. That could cause issues later once you make a commercial flood insurance claim.
Can You Afford Flood Insurance?
Before you can get insurance, you need to know if it’s something you can afford. Commercial flood insurance can cost a couple of hundred dollars a month. If you own a business, insurance companies might expect you to pay higher, usually a few thousand a year.
You can consult your insurance agent to calculate how much you should pay for flood insurance. Other professionals can also help you with this.
These experts can also help you decide how much coverage you should get. For example, if you live in a high-risk flood area, you might want to get the highest range available.
Can You Self-Insure for Floods?
If you’re having second thoughts, you can do a financial review to see if you can afford to self-insure.
Self-insuring is a technique that requires you to set aside a pool of money to use during an unexpected loss. In this case, it’s for sudden flood damage.
Note that when you do this, it means you will cover the cost yourself. So, you won’t be filing an insurance claim. It’s a risk for most people but also a choice for those who prefer to handle the issue themselves.
It’s usually a practical choice if you live in a location that doesn’t flood as often as you think. Commercial flood insurance is ideal for you if you come from somewhere that floods often or you experience it frequently.
Learn More About Commercial Flood Insurance
Most building insurance doesn’t cover flood damage, which can cause property owners to feel less secure. If your business is in a place that floods often, it’s best to get commercial flood insurance to prepare.
If not, you can get coverage as a precautionary measure or if you feel it’s a good investment after evaluating it!
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