Hurricane Harvey knocked the power out to the Arkema Chemical Plant in Crosby, Texas. The situation worsened when the flooding rendered the emergency generators inoperable. The chemicals Arkema produces include adhesives for baby diapers, resins used in plastic automotive parts, and peroxides. The peroxide products must be refrigerated so they don’t break down. If they do begin to break down, they produce heat which caused the fire and explosions we witnessed while Harvey dumped trillions of gallons of water on the Houston area. If anything, Arkema provides an excellent example of the importance of commercial flood insurance.
There are two types of commercial flood insurance, standard flood insurance, which is a FEMA administered policy and excess flood insurance. Both serve a purpose for small, medium, and large businesses and offer coverage to help get the business back up and running.
Standard Flood Insurance: The commercial flood insurance policy administered by FEMA and the National Flood Insurance Program, or NFIP, can provide coverage for;
- Building Property up to $500,000
- Business Personal Property up to $500,000
- Businesses may purchase either one or both
Building coverage may be for the actual physical building the business operates in, if it is owned by the business. Standard commercial flood policies cover the following items:
- The building and foundation
- Electrical and plumbing systems
- Water heaters, HVAC, and ventilation equipment
- Permanently installed carpeting, paneling, wallboard, bookcases, and cabinets
- Pumps, pumping machinery, awnings, canopies, and walk in freezers
- Fire extinguishing and sprinkler systems
- Outdoor antennas and aerials attached to the building
Business personal property coverage pertains to office and electronic equipment and the following items:
- Furniture and fixtures, machinery equipment, and other personal property owned and used by the business
- Stock including merchandise held in storage or for sale, raw materials, and in process or finished goods
- Portable and window air conditioners, microwave ovens, and portable dish washers
- Carpets and rugs not covered in the building coverage
- Clothes washers and dryers
- Food freezers (not walk in) and the food in the freezer
- Certain valuable items such as original artwork and furs ($2,500 total limit)
- Non-licensed self-propelled vehicles if stored inside and used to service the location or assist a person with a disability
- Up to 10% of the contents coverage for tenant improvements made to a leased facility
What’s not covered under a standard commercial flood insurance policy are financial losses caused by business interruption or loss of use from a flood.
Excess Flood Insurance: If the $500,000 of property or business personal property isn’t enough to meet the business’ needs, excess flood insurance is available from a variety of carriers. As the name implies, this coverage is designed to start where the standard FEMA policy stops, such as buildings and personal property valued at more than $500,000. There may be two additional differences worth exploring if the business has the need:
- Coverage can be written on a replacement cost basis
- Financial losses or loss of use can be included
Which and how much coverage a business needs will be largely determined by the value of the building, personal property, and potential for lost revenues. What do you think? Share your comments, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!