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Many business owners are confused by the seemingly endless array of different insurance policies and premiums. But an understanding of what your basic commercial property insurance covers and doesn’t cover is critical to any risk management strategy. Furthermore, any responsible risk management plan must include a risk assessment for flooding and earthquake damage, and a plan for insurance protection, where needed.

Does commercial property insurance cover flood damage?

No. Standard commercial property insurance will not reimburse you for flood damage, including flooding related to hurricanes and storm surge. Neither Commercial Package Policies nor Business Owners Policies include flood coverage as standard.

Where can I get flood coverage?

Ultimately, flood coverage is available under the National Flood Insurance Program – a national effort to expand flood insurance and to ensure that coverage is available even in vulnerable areas. For more information, visit their website at www.floodsmart.gov.

What does it cover?

Flood insurance provides two kinds of protection: Building property coverage and personal contents. Speak with your agent about the specific items in your building, however. Coverage of basements and areas below the lowest elevated floor are underwritten separately from other floors.

Flood insurance does not cover avoidable mildew, mold or moisture damage that the insured should have and could have mitigated or prevented. It also doesn’t cover damage to currency, stock certificates, or precious metals, nor does it cover temporary housing expenses.

Business interruption insurance is not included in your flood insurance plan. This coverage is available separately, however. Ask your agent for more information.

Autos are generally not covered. See Section IV.5 of your flood policy for specifics.

Does commercial property insurance cover earthquakes?

Again, typically not. Not every business has much exposure to earthquake damage, and so this is not a standard coverage under commercial property insurance. That said, earthquake damage can and has occurred in every state in the union since 1900, according to the Insurance Information Institute. Furthermore, just between the years 2002 and 2012, earthquakes measured at a 4.0 magnitude or greater occurred in 23 different U.S. states. So while some states certainly have more exposure to earthquake hazards than others, no state is immune.  However, the U.S. Geological Survey has identified areas with particularly high earthquake hazards in California, Oregon, Washington, and has even identified hotspots in Nevada, Utah and Wyoming.

What does earthquake insurance cover?

Earthquake insurance usually protects you against damage to our building and damage to business equipment and inventory. In some cases, there is a business interruption insurance component. Check your policy to see if there is coverage for this eventuality.

Deductibles are fairly steep – often from between 2 percent to 20 percent of the value of your building, so there’s no substitute for having some liquid capital available, or a ready and reliable line of credit if and when an earthquake strikes.

Be prepared to undergo a building/facilities inspection. Before you qualify for coverage, your underwriter may ask you to make specific property upgrades, such as bolting your building to its foundation, bracing your chimneys and walls, or other items. They may also have you strap water heaters to the walls or frames.

Again, you’ll need to obtain earthquake insurance separately from your commercial property insurance policy. Ask your agent for specifics and to get the application process started.