While California law does not require business owners to have flood insurance, this type of policy can protect your livelihood. However, it can be difficult to determine how much coverage you need and whether your location has a significant flood risk. 

Review these guidelines to make a smart decision about commercial flood insurance for your California business. 

Understanding flood zones and lender requirements 

The Federal Emergency Management Agency maintains flood maps to indicate the flood risk of zones throughout California and the United States. FEMA also continually evaluates these maps and makes updates as needed. In general, if your business is in a zone with a code starting with V or A, your location has a high risk for flooding and should be insured. Zone C, X or B locations have a much lower flood risk. However, even locations in these areas can benefit from flood coverage, since this type of damage will not fall under a typical commercial insurance policy. 

Regardless of your flood zone, you may need flood insurance if you plan to purchase a commercial location with mortgage financing. For example, all federally regulated mortgages require the borrower to have this type of policy. 

Reviewing the extent of flood coverage 

Most flood policies cover property damage caused directly by mudflow, surface water runoff, flash floods, snow melts, storm surges, tidal water overflow or inland water overflow. However, this type of insurance typically does not cover earth movement resulting from flood damaging, including but not limited to erosion, destabilization, landslide or earthquake. 

Make sure you purchase a policy that covers the value of your commercial holdings in the flood zone location. This includes the building itself, its systems and its contents, including merchandise and inventory. 

According to the California Department of Insurance, floods are the state’s most common type of natural disaster. Shield your business from the impact of this type of catastrophe by exploring your commercial flood insurance coverage options. You can seek coverage through the National Flood Insurance Program or from a private insurance provider.