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 getting inundated 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, catastrophic instances of 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 Insurance policy. Products like Standard Fire and Special Perils (SFSP), Bharat Laghu Udyam Suraksha (BLUS), and Bharat Sookshma Udyam Suraksha (BSUS) 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, goods, commercial vehicles, electronics, and other important assets.

What does Flood Insurance cover?

Flood Insurance provides reimbursement for any unexpected loss of or damage to commercial assets. It can protect your business from the following common risks:

  • Water Leakage: Any leakage of water from the roof of your commercial building during heavy rains that may result in your stock, machinery, or important documetns getting damaged can be covered under Flood Insurance
  • Short Cricuits: Heavy rainfall and flooding can also lead to short circuits and electrical arcing that may cause damage to any nearby assets. Flood Insurance provides coverage for such risks
  • Spoilage of Goods: Flood Insurance helps recover losses caused by destruction of goods (such as electronic equipment, food and beverage products, or wooden furniture) that may be stored on your business property
  • Damage to Building Structure: Any damage to building structure, its foundation, walls, or ceiling due to a storm, flood, or heavy rainfall can be covered under this policy. Any collapse of land along a body of water can also be covered

This policy also protects basements and structures (such as fences, awnings, etc.) attached to the outside of the insured premises from any accidental damage.

Exclusions of Flood Insurance

Flood Insurance comes with the following set of exclusions:

  • Willful Negligence- Any damage to your property due to your own negligence or willful misconduct will not be covered under a Flood Insurance policy
  • Assets not listed in the policy- Loss of assets that are not listed in your Flood Insurance policy will not be covered. Make sure you list every important asset, such as documents and cash, before purchasing your policy
  • Vehicles- Damage to commercial vehicles during a flood or heavy storm will not be covered under a Flood Insurance policy. If your business makes frequent use of vehicles for carrying cargo, passengers, or machinery, you might want to opt for a separate Commercial Vehicle Insurance policy to protect them from flood and other risks
  • Outdoor Property- Any asset that is located outside the boundary walls of your business and not attached to the building structure in any way is excluded from coverage under Flood Insurance. This includes any stock, equipment, or machinery that has been temporarily kept outside of the business premises
  • Other Types of Water Damage- Flood Insurance will not cover water damage that is not caused by floods, storms, or heavy rainfall. Any internal flooding or leakage due to faulty construction of the building, plumbing issues, sewage backups, etc. is excluded from coverage

Keep in mind that like all insurance policies, Flood Insurance also comes with a deductible. This means at the time of a claim, the insurance company will deduct a small amount before making the payout.

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 security that will protect them against sudden and disastrous events of flooding. And Flood Insurance, with its affordable pricing and comprehensive coverage, is the perfect tool to offer this kind of protection.

What are the benefits of getting your business insured?

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.