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Starting a Small BusinessModule 2By Published Editorial policy

Does Business Insurance Cover Flooding?

Learning goal: Know why most business property policies exclude flood, and how commercial flood insurance fills the gap.

Short answer

Usually not. The Texas regulator says most commercial property policies exclude flood damage, as homeowners policies do. Businesses can buy commercial flood insurance, including through FEMA's National Flood Insurance Program, which covers the building and its contents, such as equipment and inventory, up to $500,000 each. Lost income from a flood needs separate coverage.

Read to the end to complete this lesson.

On this page
  1. The Fuller Picture
  2. Key Takeaways
  3. Real-World Example
  4. Common Mistakes
  5. Interactive Exercise
  6. Knowledge Check
  7. Questions to explore next

The Fuller Picture

A business owners policy feels comprehensive, so flood gaps are easy to miss. Like homes, businesses need a separate flood policy, and building and contents are separate coverages, each with its own limit.

Key Takeaways

  • Texas Department of Insurance: "Most policies exclude damages from floods, earth movement, war, nuclear disaster, wear and tear, and insects or vermin."
  • FEMA: "Commercial flood insurance protects your business's building and equipment."
  • "Each type of coverage (building and contents) covers up to $500,000 in flood damage," FEMA says.
  • Contents coverage can include "merchandise and raw materials held in storage or for sale," per FEMA.
  • NFIP policies don't pay business income losses from a flood; ask about private options.

Real-World Example

A shop on a creek

Maya's pottery shop sits near a creek. Her business owners policy excludes flood, so she buys NFIP commercial flood coverage: $300,000 for the building and $100,000 for kilns, inventory and supplies. When the creek floods, the building and contents claims are paid less their deductibles. The flood policy doesn't pay her lost sales during cleanup.

Common Mistakes

  • Assuming a BOP covers flood.
  • Buying building flood coverage only, leaving inventory uninsured.
  • Expecting the flood policy to pay lost income.

Interactive Exercise

Check your flood gap

Use your policy and FEMA's flood map.

Tick each step as you do it. Your checklist is saved in this browser.

Knowledge Check

Question: What does FEMA say NFIP commercial flood policies cover for each of building and contents?

Explanation: NFIP commercial building and contents coverages each go up to $500,000.

Recommended Insurpedia Tools

  • Coverage Builder: Answer a few questions about your home, vehicles, family and work, and see insurance topics worth researching for your situation, each linked to a plain-English explanation. It doesn’t tell you what to buy.

Related Insurance Terms

Related Scenarios

Questions to explore next

Questions readers often ask next about this topic:

  • Do I need flood insurance for a leased space?
  • What does commercial flood insurance cost?
  • Does business interruption cover floods?

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Sources

The factual claims on this page were checked against these sources. Rules and figures change, so check the source itself if you need to confirm the current version.

Educational information, not advice: This lesson is for general education only, not legal, financial, or insurance advice. Actual coverage, discounts, and requirements depend on your policy’s wording, your insurer, and the laws of your state. Confirm specifics with your own insurer or a licensed agent before making a decision. Insurpedia does not sell insurance and does not recommend specific insurers. Flood exclusion and NFIP commercial limits come from the Texas Department of Insurance and FEMA.