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Flood Insurance: Does My Business need it?Does business insurance cover floods? Not usually. Standard Business Owners’ Policies (BOP) and other property and liability (package) policies do not cover flood unless an endorsement is added. These endorsements; however, typically are National Flood Insurance Plan (NFIP) coverage disguised as your company’s. Difference in Conditions forms (DIC) cover flood, but again, that coverage usually is provided by NFIP through an arrangement known as reinsurance. If your financing requires flood insurance, your agent can provide that through the NFIP. Caution: coverage does not become effective for thirty days, so do not drag your feet about obtaining a policy. From a risk management point of view, flood insurance is troublesome. The likelihood of flood changes with external factors. Flood plains are obvious indicators of need. However, increased development with a greater area of paved surfaces changes the frequency of regional flooding, and the areas of flooding. Rivers and tributaries reach bankfull conditions quicker. Some storm water pre-treatment and slow-release systems create on-site flood conditions during intense rain events. External factors such as dams or levees up gradient from your site may indicate prudence. Is the area prone to rainy seasons or long periods of snow melt or rainfall? If so, rising waters can occur from perched or artesian aquifers. Do mudslides occur in your area? Has there been deforestation lately? The type of business you own may also indicate what your flood insurance needs should be. Inventory that is susceptible to water damage like high-tech electronics, lighting manufacturers, or clothing manufacturers generally require insurance more than a scrap metal dealer. Masonry buildings versus stucco or frame construction suggest greater needs for flood coverage as well. Your business insurance professional can review your situation. The NFIP does not allow direct access to coverage. And, coverage is limited to $500,000 for the building and $500,000 for contents. Excess coverage can be obtained through market sources. Your business insurance agent can suggest non-insurance ways to cover flood damage. For example, inventory stored outdoors is not covered. Vehicles may not be covered. With more development, development in lower areas, levees, flood walls, and dams, floods my become more frequent. Review your situation with a property specialist to avoid a costly gap in coverage. Remember: floods are rising water, whereas rain and wind damaging your roof in a storm is likely covered under your broad property policy. There are examples where cities have built flood walls to abate the effects of river floods only to have the storm come in from the opposite direction. The flood wall acted as a dam to flood the intended protected property. In this way, floods and their causes are unpredictable, and now more frequent. Take a hard look at flood insurance.
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Born and raised in Southern California, Dave was educated at Loyola High School and Arizona State University. After graduation, he founded two successful restaurants in Arizona, eventually selling them to move back to California. He began his insurance career working for…