Hurricane Season Survival: Do You Have Flood Insurance?

Did you know at least 25% of businesses that close after a flood never reopen, according to the National Flood Insurance Program (NFIP)?  If you live in a flood zone or your business is located in a flood risk area, carrying a separate flood insurance policy can help protect you from damaging financial loss.

Many homeowners and business owners do not realize that traditional insurance policies rarely provide protection in the case of a flood. However, you can buy coverage from the NFIP.

So what qualifies as a flood?  “A flood is a general and temporary condition where two or more acres of normally dry land or two or more properties are inundated by water or mudflow,” according to the NFIP. Flooding can be caused by a hurricane, a clogged drainage system or just heavy rainfall – a common occurrence in South Florida.

To identify a given community’s flood risk, the Federal Emergency Management Agency, better known as FEMA, conducts a Flood Insurance Study. Each area’s flood risk is reflected on a flood hazard map, and insurance premiums are partly based on risk. For example, if your property is located in a high-risk, coastal area, your flood insurance premium will generally be higher than if your property was located in a low-risk, inland community. Other factors such as the amount of coverage purchased and the exact coverage specifications also weigh into the premium.

Flood insurance policies are written as a single policy by specific flood insurance companies that participate in the NFIP. Some insurance carriers will provide their own flood coverage either in the form of an endorsement to a homeowner’s policy or a separate policy written by their own flood program.

You can elect to purchase coverage for your building and/or its contents. The NFIP website includes a general guide to what’s covered in a flood insurance policy. Commercial flood policies give you up to $500,000 of coverage to protect your building and up to $500,000 to protect its contents. A primary flood policy for a home includes policy limits up to $250,000 in building coverage and $100,000 in contents coverage (factoring in depreciation). For home coverage, there is typically only coverage for a primary home structure; any other structures, such as a guest house or shed, will not be covered.

Flooding due to a hurricane or otherwise can be a costly and devastating experience, but having proper insurance coverage can help protect you and your business from loss.