Natural disaster insurance for small business: What you need to know

What policies cover small businesses after a hurricane or flood?

Insurance is a vital part of your business’s risk management plan, especially if your business is located in an area that experiences hurricanes, flooding or other kinds of severe weather.

There are several types of small business insurance that protect businesses against hurricanes and floods. Some of the most common ones are:

• Commercial property insurance
• Commercial car insurance
• Flood insurance
• Business interruption insurance

Will commercial property insurance cover hurricanes and floods?

Commercial property insurance covers hurricanes, but depending on your location and insurance company, you might need to add a rider – or add-on – to get more comprehensive hurricane coverage. This is especially true if your business is in a high-risk area, like a coastline. 

Commercial property insurance will cover many types of hurricane-related damage. For example, if the roof gets blown off your office building or flying debris shatters a window, commercial property insurance will pay for the repairs. 

However, commercial property insurance excludes coverage for flooding, even when it’s caused by a hurricane or storm surge. 

You can purchase commercial property insurance as a standalone policy or as part of a business owner’s policy (BOP), which combines general liability and commercial property insurance at a discounted rate.

What natural disaster damage do commercial insurance policies cover?

If you’re a small business owner, you’ll need to purchase a handful of policies to ensure you're financially protected from most natural disasters. Here’s what each covers:

• Commercial property insurance: These policies cover damage to your physical business location when the damage is caused by wind, rain, fire, falling objects, flying debris and other perils. It also covers business contents, like inventory, furniture and equipment. Flooding isn’t covered under standard commercial property insurance.
• Commercial auto insurance: A policy with comprehensive coverage covers non-collision events, like fire, theft and natural disasters. Be aware that a basic policy only covers bodily injury and property damage liability you or your drivers cause to others during an accident, while collision coverage covers damage to your vehicles from collisions with another vehicle or object. 
• Commercial flood insurance: Commercial flood insurance covers your building and business contents if there’s a flood. The most common way to get commercial flood insurance is through the National Flood Insurance Program (NFIP). Some private insurers offer flood coverage as a commercial property insurance endorsement.
• Business interruption insurance: If your business is forced to close temporarily because of hurricane damage to commercial property, business interruption insurance will partially cover lost income.

What is commercial hurricane insurance?

Insurance companies don’t sell standalone “hurricane insurance” policies. If you hear the term commercial hurricane insurance, it usually refers to the collection of coverages mentioned above – commercial property insurance, commercial auto insurance, commercial flood insurance and business interruption insurance – that will protect your small business against the financial losses resulting from a hurricane.

What doesn’t it cover?

Commercial hurricane insurance doesn’t cover all the risks that small businesses can face after a severe storm. These are some of the most common losses that are excluded under standard commercial hurricane insurance coverage:

• Flood damage, including damage from storm surges, unless you have flood insurance
• Employees’ personal vehicles or personal belongings
• Damage that exceeds the coverage limits of your policy
• Negligence or wear and tear
• Home-based businesses
• Vacant or unoccupied business properties

What is commercial flood insurance?

One of the most important things for small businesses to remember is that commercial property insurance doesn’t cover floods. For flood coverage, businesses need commercial flood insurance, also called business flood insurance.

Commercial flood insurance covers flood damage to your business’s physical location and business property. The most common way to get commercial flood insurance is through the federally funded NFIP.

An NFIP commercial flood insurance policy includes building property coverage and personal property coverage with individual coverage limits of $500,000. These two coverages have separate deductibles you’ll pay out-of-pocket when filing a commercial flood damage claim. 

When you purchase NFIP flood insurance for a commercial property, there’s usually a 30-day waiting period before you can file a claim. That’s why it’s important to buy flood insurance before a storm is on the horizon. 

Some insurance companies also offer private commercial flood insurance. Private flood insurance has some benefits compared to NFIP policies, including shorter waiting periods and potentially higher coverage limits. However, private flood insurance rates can be much more expensive.

Who needs commercial hurricane/commercial flood insurance?

Any business located in an area that experiences hurricanes – even infrequent storms – should have a hurricane insurance package. Without hurricane insurance, you have no financial protection for your physical business location or business property in the event of a storm. 

Flood insurance is also essential for businesses in flood-prone areas. This includes businesses in states that rarely experience hurricanes, like inland areas of the Northeast that recently have been hit by flooding.  

Together, commercial property insurance and commercial flood insurance provide essential coverage for small businesses in high-risk hurricane states. If you have any business-owned vehicles or work trucks, commercial auto insurance is also important (and legally required). 

How much does commercial hurricane/commercial flood cost?

The average price for commercial property insurance is $67 a month while the average price of a commercial auto policy is $167, according to small business insurance broker Insureon.

However, the rates for all commercial insurance policies, especially flood and business interruption insurance, depend on a variety of factors and are different for every business. Some of the factors Insureon says can impact hurricane insurance rates include:

• Location
• Business size
• Business revenue
• Past claims history
• Coverage limits

In addition to these factors, your commercial property insurance premium will depend on the deductible you choose. The higher your deductible is, the lower your premium will be. However, a higher deductible means the claim payout will be smaller after a covered event.

There’s also a separate deductible for NFIP flood insurance claims. Commercial flood insurance costs are lower if you choose a higher deductible, and vice versa.

Which companies offer commercial hurricane/ commercial flood?

Many reputable insurance companies sell commercial hurricane insurance. Some of the biggest commercial insurers by market share include:

• Chubb
• Travelers
• Liberty Mutual
• CNA
• The Hartford
• Progressive

According to the Insurance Information Institute (Triple-I), an insurance industry group, these are the biggest private flood insurance underwriters:

• Zurich Insurance Group
• Berkshire Hathaway
• AXA
• Assurant
• AIG
• Liberty Mutual

How to pick the right company for hurricane/ commercial insurance

If you’re in the market for hurricane insurance or flood insurance, it’s important to consider factors besides price. For instance, the cheapest commercial flood insurance quote you find might not be the best policy for your coverage needs.

When shopping for a policy, pay close attention to third-party ratings, such as:

• J.D. Power: Publishes multiple annual studies on customer satisfaction and claims satisfaction.
• AM Best: Grades licensed insurance carriers based on financial strength and stability.  
• National Association of Insurance Commissioners (NAIC): Maintains a database of complaints that every insurance underwriter receives.

Choose a company that offers the type and amount of hurricane coverage you want. It can also be helpful to read company reviews to see what current and past policyholders think about the carrier. 

To potentially reduce costs, talk to an insurance agent about available discounts. You might be able to save money if you bundle multiple commercial insurance policies together or take certain safety measures to stormproof the building in which your business operates.

How soon do you have to buy commercial hurricane/ commercial flood insurance before you can make a claim?

The amount of time you have to purchase hurricane insurance before making a claim depends on the type of policy.

Typically, commercial property insurance doesn’t require a waiting period before you can file a claim. You can file a business interruption insurance claim right away, but there’s usually a waiting period of one to three days before the benefits will kick in.

Most NFIP commercial flood insurance policies have a 30-day waiting period, which is meant to deter businesses from getting coverage right before a storm hits. If your business sustains flood damage within the 30-day waiting period, the claim won’t be covered.

How to file a commercial hurricane/commercial flood insurance claim

Follow these steps to file a commercial hurricane or flood insurance claim:

1. Document the damage

When it’s safe, take photos and videos to document the damage. You should also write down what damage occurred and what items were destroyed. Record serial numbers for larger items, like appliances and computers. If you have receipts for any damaged items, you can include them with your claim forms. 

2. Contact your insurance company

Notify your insurance company about the damage. For NFIP flood insurance claims, contact your carrier or call the NFIP at (877) 336-2627 if you need help finding your carrier. An agent will walk you through the claim process and provide the paperwork you’ll need to submit. Some insurance companies allow you to file claims online or through a mobile app. 

3. Clean up and make temporary repairs

If necessary, make temporary repairs to prevent further damage, like patching broken windows. Keep receipts for materials you purchased out-of-pocket, which will be reimbursed as part of the claim settlement. You should also remove flood-damaged items that could lead to potential hazards, like contaminated debris. 

4. Meet with an adjuster

An adjuster will likely visit your business in person to assess the damage. This will help them determine an estimated cost of repairs. Plan to walk through the building with the adjuster and point out any damage. During the meeting, you can ask questions about the payment schedule and who will receive the payment (you or the contractor).

5. Receive your payment

Once the claim has been investigated, the adjuster will present their findings and provide a settlement amount. You can choose any contractor you want to make the repairs, or you can get a recommendation from your insurance company. Keep all records of the claim and repairs made in case you have another loss in the future. Triple-I notes, however, that if you have a mortgage on a property, the insurer’s check may be made out to both you and the lender.

What happens if your business was affected by Hurricane Helene and Hurricane Milton?

If your business was damaged in Hurricane Helene and Hurricane Milton, you must report two individual claims, even though the incidents were just days apart. This is also the case for homeowners' and renters' insurance and personal auto insurance claims.

“Each storm claim needs to be filed separately,” says Mark Friedlander, director of corporation communications for Triple-I.  When you file two hurricane insurance claims, both losses will be subject to the full coverage limits of your policy. 

If your business was in the path of Hurricane Helene and you couldn’t get back to assess the damage before Hurricane Milton struck, it can complicate the claim process. 

“Having documentation that you previously sustained damage from Hurricane Helene is essential to process a new claim from Milton. Without this, your Hurricane Milton claim could be delayed or denied,” Friedlander says.

What our expert says

Q: If a business suffers damage from back-to-back storms, should it file one claim for both events or does it need to file two separate claims?

Mark Friedlander Director of corporate communications at the Insurance Information Institute, a trade association.

"Each storm claim needs to be filed separately."