Protect your business when the water rises

If they didn't know it before, a lot of businesses probably found out something about their insurance last week — if the water comes through the roof, the regular property damage coverage will pay the claim, but if the water comes through the door, it won't.

The only way to obtain flood insurance is to purchase it through a special policy under rules established by the Federal Emergency Management Agency's National Flood Insurance Program. And while a number of companies offer the coverage, the rates are set by the federal government and there are limits on the amounts of coverage available.

The rates are based on risk, said Kelly Roy of Capital Insurance in Cape Girardeau. "If you are in a flood zone, the rates are much higher. If not, the rates are very cost effective. And for circumstances like this week, it will cover mudslides and stormwater, and it is a really good policy to have. It is extremely inexpensive."

Roy provided some examples of the cost of covering a commercial building. For example, a policy that will cover $500,000 worth of damage to a building and $500,000 on contents, with a $5,000 deductible, will cost a business owner in a high-risk area like Dutchtown $8,446 annually. For a business owner in a lower-risk area, the cost is $2,300 a year.

The $500,000 maximums are the biggest policies that the flood insurance program will write.

If higher amounts of insurance are required, the Insurance Information Institute recommends layering coverage through the purchase of an excess flood policy or Difference in Condition, or DIC, policy. Coverage limits of $5 million or more are often available.

The only catch in the flood insurance program is that the community where the business is located must be enrolled in the program. Most communities are enrolled. Alexander County, Ill., opted out of the flood insurance program for many years but in 2007, the county received probationary reinstatement.

To determine risk, the program issues maps that mark the territory that is considered at highest risk of flooding. Known as the 100-year flood plain or the base flood area, the property included are the locations where water will reach in a flood that has a one-in-100 likelihood of occurring in any given year.

Those maps are automated, Roy said, and an insurance broker can enter the location on their computer and immediately know the risk. The only catch, she said, is when the property is in an area that has been substantially altered, like the Cape La Croix-Walker Creek flood projects along Kingshighway.

"It would be warranted, with the drainage ditch through Cape, to redo the flood map," Roy said. "It could probably help a lot of people."

After the Flood of '93, the flood insurance program changed the rules that had allowed people to buy insurance when high water was approaching and then drop the coverage after the danger passed. Before 1993, a policy had to be purchased only five days before the damage occurred to receive full coverage. Since then, the rules state that the policy has to be in effect for 30 days, unless the policy is purchased when a building changes hands as part of the requirements for a mortgage.

The heavy rains last week showed that even people outside the flood hazard areas can suffer damage from floodwaters, Roy said.

"It is really hard advising someone or trying to talk them into it if they are not in a flood zone and the bank is telling them they don't have to have flood insurance," Roy said. "In circumstances like this week, with all the rain, it can show everyone there are circumstances where, even if you are not in a flood zone, you need flood insurance."

rkeller@semissourian.com

335-6611, extension 126

On the Net

• National Flood Insurance Program: www.fema.gov/business/nfip