Water can do a lot of damage to your business, whether it can in during flooding or after a water pipe burst. Insurance can help get you recover your losses and get your business back up and running again. It starts with determining how the water damage occurred and what kind of insurance coverage you have.

How Did the Damage Occur?

Water usually comes into businesses in one of two ways:

  1. From the outside during a natural flood
  2. From non-flood events such as rain coming through a hole in the roof, a burst water pipe, a broken HVAC system, or a backed up water main/sewer.

Each of these scenarios requires different insurance coverage.

In the United States, flood damage is not covered by private insurance. It is covered by flood policies issued by the National Flood Insurance Program. This is a government backed program that offers low-cost policies to commercial and residential property owners. The policies usually need to be in place 30 days before a flood occurs for the damage to be covered. The only exception is a policy going into effect upon a mortgage closing.

Most private commercial insurance policies do cover damage caused by non-flood events. The exact coverage details are usually outlined in the policy itself.

Flood Damage

Commercial flood policies offered by the NFIP offer coverage for the physical damage, including:

  • The building and its foundation
  • The electrical and plumbing systems for that building
  • The HVAC systems
  • Appliances like refrigerators, stoves, and dishwashers
  • Permanent carpeting and hard flooring
  • Permanent finishes like wallboard, paneling, cabinets and bookcases
  • Window coverings like blinds and curtains
  • Debris removal
  • Portable appliances and equipment housed in the building
  • Food freezers

Coverage for parts of the property that are underground is very limited. Damage and losses from items kept in the basement, a walk-out lower floor, or in crawl spaces may not be covered fully or at all.

There are some things that NFIP policies do not cover. The policies do not include coverage for the following:

  • Financial losses due to interruption of business or due to loss of use of the insured property
  • Damage to things outside the building, such as landscaping, decks, walks, swimming pools, and hot tubs
  • Valuable items such as currency, precious metals, or stock certificates.

Most NFIP policies will cover up to $500,000 in property damage and $500,000 of the building’s contents.

Non-Flood Water Damage

Take a careful look at your private commercial property damage insurance policy. You should have non-flood water damage clause in the policy which outlines what is covered, what is not covered, and the coverage maximums for the damage.

Making a Claim

The process for making a claim for water damage is pretty much the same for flood or non-flood damage.

  1. Stop the water flow or leaks if possible.
    • Of course, if your home is flooded by a raging river, that is likely impossible until the water recedes. However, if you have a burst water pipe, you need to take steps to stop the leak. Turn off the water main or get the pipe repaired quickly.
  2. Contact your insurance company as soon as possible.
    • Most insurance companies offer a 24/7 claims number. The customer service representative can help you get the claim started and tell you the exact next steps the insurance company will need you to do.
  3. Take pictures and/or video of the damage.
    • You need to have a visual record of the damage to the building and its contents. This is critical for your claim.
  4. Make reasonable repairs to the property to secure it from further damage.
    • This includes covering holes in the roof, securing windows with plywood, etc.
  5. Start getting the water out.
    • If you have water remaining inside the building, you can start removing it. You can do this yourself or have a water extraction company do it. Keep all receipts since insurance may cover those costs.
  6. Don’t throw anything away.
    • The adjuster will need to see all damaged property.
  7. Write down all your interactions with the insurance company.
    • This includes time, date, who you spoke with, and the details discussed. Always follow up in writing on important discussions.
  8. Keep a central file that includes your interaction log, documents received from the insurance company, copies of the photos taken, and copies any correspondence you send.

You should hear back from the insurance company within a couple of days after filing the claim. They will send out an adjuster to examine the property damage and investigate the claim. Once the adjuster makes his report, the insurance company will pay the claim or reject it. If your claim is rejected, it’s best to contact a public insurance adjuster. A public insurance adjuster will work directly for you, as opposed to working for the insurance company. They can work on your behalf and negotiate with the insurance company to get the money your business needs to recover.

The best bit of advice is to have appropriate insurance in place before water damage occurs and to act promptly after you suffer a loss. It will help you keep your business open.

Have you suffered flooding/water damage to your business? Is your insurance company not giving you the money you need or just stalling? Contact Commercial Claim Pro (operating in Colorado and Texas) to get help.

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