October 28, 2021

Flood Insurance

Flood Insurance


Floods are the most common natural disaster in India. The country’s coastal cities face a perpetual risk of experiencing harrowing devastation on account of rivers or seas overflowing during heavy rainfall. According to the Geological Survey of India (GSI), major flood-prone regions such as Maharashtra, Gujarat, West Bengal, Assam, and others cover almost 12.5% of the country. From the 2005 Mumbai flood disaster, to the 2015 Gujarat floods, there have been numerous instances of major flooding taking a toll on people's lives and livelihoods.

As global warming and unchecked climate change alter rainfall patterns ,major floods laying waste to countless buildings and offices have only accelerated in recent years. All this can lead to millions of dollars in property and stock damage for businesses, not to mention the loss of profit due to interrupted operations.

As a result, it becomes crucial for business managers and owners to opt for Flood Insurance.

Flood Insurance secures you financially in an unfortunate event of water damage to your commercial property due to flooding. Floods can include flash floods, seasonal floods, inland and overland floods, inundations, etc.

In India, Flood Insurance is included in a Fire and Allied Perils Insurance policy. Products like Standard Fire and Special Perils (SFSP), Bharat Laghu Udyam Suraksha (BLUS), and Bharat Sookshma Udyam Suraksha (BSUS) policies all have a special cover known as STFI (Storm, Tempest, Flood, Inundation).

STFI includes coverage for events like Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation. Any of these perils can result in regional flooding causing unforeseen water damage to buildings, factories, machines, stocks, commercial vehicles, cargo, etc.

The Fire and Allied Perils Insurance products cover buildings, structures, stocks, furniture, fixtures, etc. from any of the insured perils, including flood and inundation. They also cover basements and structures (such as fences, awnings, etc) attached to the outside of the insured premises. This policy will not only cover you against flood related risks but also a number of other perils like natural disasters, fire, riots, terrorism, etc.

However keep in mind that for SFSP policies, ₹10,000 or 5% of the claim amount, whichever is more will be deducted before a payout is made. Similarly, for BLUS and BSUS policies, a fixed sum of ₹5,000 will be deducted from the claim amount before it is received.

Given the rise in frequency of natural disasters, it is absolutely critical for businesses, irrespective of their location or industry, to opt for some kind of insurance that will protect the against sudden and disastrous events of flooding.

Read more about what a Fire Insurance policy covers here

Opinions, conclusions and statements of intent expressed in this article are that of the author and Verak does not accept liability for the views expressed unless confirmed by an authorized representative of the Company independently of this communication.