What does commercial flood insurance cover—and what should Texas businesses check?

By Mark Melliand, owner, Melliand Insurance Agency · 13 years as an independent agent · Published October 28, 2026

The short answer

Flood is usually handled separately from commercial property insurance. The Texas Department of Insurance (TDI) notes that most commercial property policies exclude flood damage. Commercial flood insurance may be available through the National Flood Insurance Program (NFIP) or from private insurers, and it can insure a business’s building, its contents, or both, within the policy’s limits.

What a flood policy pays depends on the actual policy:

its definition of flood
the property it insures
its exclusions
its limits and deductibles
any endorsements

This guide uses the NFIP’s commercial form as its main example. It explains what to review and doesn’t predict how any claim will be decided. For what a property policy covers and excludes, see our guide to commercial property insurance coverage in Texas.

Which NFIP form applies to businesses

The NFIP issues different Standard Flood Insurance Policy (SFIP) forms for different kinds of buildings. The General Property Form, F-123 (October 2021 edition), covers non-residential buildings and their contents, as well as residential buildings designed for five or more families that aren’t condominium buildings. FEMA’s October 2025 Flood Insurance Manual, the edition linked as current in the NFIP manuals directory, includes that same F-123 October 2021 edition. The descriptions below come from that form, not from the NFIP Dwelling Form used for homes.

The form is cited here as an illustrative example. The terms that apply to you are in your own policy and declarations.

How the reviewed policy defines a flood

The NFIP General Property Form defines a flood as “a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (one of which is your property).” The condition must come from one of these:

overflow of inland or tidal waters
unusual and rapid accumulation or runoff of surface waters from any source
mudflow

The definition also includes certain collapse or subsidence of land along the shore of a lake or similar body of water, as the form describes.

Not every water event qualifies. Under the reviewed form:

Water from plumbing or a condition inside the building. The form excludes water, moisture, mildew or mold damage that results primarily from a condition substantially confined to the insured building, or within your control. Examples include failures or breakage of water or sewer lines, drains, pumps, fixtures or equipment.
Sewer and drain backup. Water that backs up through sewers or drains, discharges from a sump pump, or seeps through the property is excluded, unless there is a flood in the area and the flood is the proximate cause.
Rain and surface water. Rain, snow, sleet, hail and water spray are excluded as direct causes. Surface water counts only when it meets the flood definition, which requires the general condition affecting two or more acres or two or more properties.
Wind. The form excludes wind and windstorm. Coastal businesses should review wind coverage separately. Our commercial property guide discusses wind and hail, including the Texas Windstorm Insurance Association.

Building coverage and contents coverage are separate

The NFIP General Property Form has a building coverage (Coverage A) and a personal property coverage (Coverage B). The form insures personal property only “if you have purchased personal property coverage.” The National Association of Insurance Commissioners (NAIC) similarly notes that personal property isn’t covered under a building-only policy unless contents coverage is added.

Building coverage (Coverage A) insures the building described on the declarations page, including certain additions and extensions. It also lists fixtures, machinery and equipment that are insured under Coverage A only, such as central air conditioners, elevator equipment, fire sprinkler systems, walk-in freezers, furnaces, pumps and light fixtures.
Contents coverage (Coverage B) for a business insures your furniture and fixtures, machinery and equipment, stock, and other personal property you own and use in your business. This applies while the property is inside the fully enclosed insured building, subject to the form’s list of property not insured. The form defines stock as merchandise held in storage or for sale, raw materials, and in-process or finished goods, including packing and shipping supplies. Stock doesn’t include property the form lists as not insured, with limited exceptions for certain merchandise, such as parts and equipment for self-propelled vehicles, watercraft furnishings and equipment, spas and hot tubs, and swimming pool equipment.

What owners and tenants should each review:

A building owner should confirm whether the policy covers the building, the owner’s business contents, or both.
A tenant generally needs to look at contents coverage for its own property. The form also has a specific improvements provision for tenants (see below).
Check your lease for any flood insurance requirements. See our guide to commercial lease insurance requirements in Texas.

Tenant improvements, leased equipment and property of others

Tenant improvements. Under the reviewed form, a tenant “may apply up to 10 percent of the Coverage B limit” to improvements made part of the building it occupies that it acquired or made at its own expense, even if it can’t legally remove them. That doesn’t increase the contents limit. The form also says that if you’re a tenant, your personal property must be inside the fully enclosed building.
Leased equipment and others’ property. The form describes insured business contents as property owned by you. It insures personal property “owned solely by you,” with separate wording for condominium associations. If you lease equipment or hold customers’ property, ask how the policy would treat it and what your lease or equipment agreement requires.

Basements, elevated buildings, outdoor property, vehicles and inventory

The reviewed form restricts several kinds of property. Under the NFIP General Property Form:

Basements and below elevated floors. For property in a basement in any zone, and below the lowest elevated floor of an elevated post-FIRM building in certain high-risk zones, coverage is limited to listed items. Building items such as central air conditioners and electrical boxes are listed, if installed in their functioning locations and, where necessary, connected to a power source. For contents in those areas, the eligible items are portable or window air conditioners, clothes washers and dryers, and food freezers other than walk-in freezers. The form separately lists food in any freezer.
Outdoor property. The form doesn’t insure personal property outside the fully enclosed building, except under its specific property-removed-to-safety provisions described below. It also excludes items such as land and landscaping, walks, driveways and patios outside the building’s perimeter walls, fences, retaining walls, docks and piers, and swimming pools and their equipment.
Vehicles. Self-propelled vehicles and machines are not insured, with narrow exceptions for unlicensed vehicles used mainly to service the described location, or designed to assist persons with disabilities, while inside a building at the described location.
Money and records. Money, securities and valuable papers are not insured.
Inventory and equipment. Stock and machinery are part of contents coverage. They are insured only while inside the fully enclosed building and subject to the basement and elevated-building limits.
Property removed to safety. The form pays up to $1,000 for reasonable expenses to move insured property away from the described location to protect it from flood. Property moved for that purpose is covered at the other location for 45 consecutive days, if it is placed in a fully enclosed building or otherwise reasonably protected from the elements, and subject to the form’s other conditions.

How losses are valued

The NFIP General Property Form settles losses differently from the NFIP’s residential replacement-cost provisions. After the deductible, it pays the least of:

the applicable amount of insurance
the actual cash value
the cost to repair or replace the property with material of like kind and quality within a reasonable time after the loss

The form defines actual cash value as “the cost to replace an insured item of property at the time of loss, less the value of its physical depreciation.” Private flood policies may value losses differently, so read the valuation clause in any policy you’re considering.

Limits and deductibles

Limits. FEMA’s October 2025 Flood Insurance Manual lists maximum Regular Program limits for a non-residential building of $500,000 for building coverage and $500,000 for contents. Lower maximums apply in the Emergency Program. Your declarations show the limits you actually carry.
Deductibles. The deductible amount is shown on the declarations page. Under the reviewed form, separate deductibles apply to the building and to personal property in each flood loss. The deductible is doubled for a building under construction, alteration or repair that doesn’t yet have at least two rigid exterior walls and a fully secured roof. It doesn’t apply to loss avoidance measures or to Increased Cost of Compliance coverage.
Other coverages. The form also includes debris removal and loss avoidance measures, such as up to $1,000 for sandbags, supplies and labor under specified conditions.
Increased Cost of Compliance. This coverage helps pay to comply with a state or local floodplain management law or ordinance affecting repair or reconstruction of a flood-damaged building. Under the reviewed form, it applies only to policies with building coverage and has additional eligibility conditions.

Lost business income, extra expense and temporary relocation

The NFIP General Property Form pays only for direct physical loss by or from flood. It specifically does not pay for:

loss of revenue or profits
loss of access
loss of use
loss from interruption of business or production
additional living expenses
any other economic loss

FloodSmart likewise lists financial losses caused by business interruption among the items NFIP flood insurance doesn’t cover.

A business that wants protection for lost income or extra expenses after a flood needs to review other options. Don’t assume a private flood policy includes business income. The NAIC says private insurers “may have higher limits or broader coverage than NFIP policies,” but that depends on the specific product. Ask whether a policy includes business income or extra expense for flood, and on what terms.

A commercial property policy’s business income coverage generally depends on a covered cause of loss. If flood is excluded there, flood-related income loss generally won’t be covered by that policy. See our guide to business income and interruption insurance.

NFIP flood vs. private flood

NFIP policies follow the federal SFIP forms. A private company can sell and service an NFIP policy without making it a private flood policy. For example, The Hartford says it participates in FEMA’s Write Your Own program and that “all policies are written subject to the National Flood Insurance Program.”
Private flood policies are written on the insurer’s own terms. TDI notes that you can buy flood insurance from an insurance company, and that “the coverage and premium can be different between companies.” The NAIC suggests working with your agent to understand a private policy and compare it with an NFIP policy.

When comparing any flood policy, review:

the flood definition
property insured and not insured
basement and outdoor property terms
valuation
limits and deductibles
whether business income or extra expense is included
when coverage takes effect

When coverage starts: waiting periods and exceptions

NFIP rules. FEMA’s October 2025 Flood Insurance Manual says new NFIP policies and endorsements adding or increasing coverage generally take effect after a 30-day waiting period, with three exceptions:

Loan exception. When the initial purchase of new, additional or increased coverage is in connection with making, increasing, extending or renewing a loan secured by the property, and the application and full payment are received within the required timeframes, no waiting period applies. Coverage takes effect as of the loan closing.
Map revision exception. A 1-day waiting period applies during the first 13 months after a flood map revision newly places a building in a Special Flood Hazard Area.
Post-wildfire exception. A 1-day waiting period can apply to certain privately owned property damaged by flooding that originated on federal land and was caused or worsened by post-wildfire conditions, when coverage is bought within the stated timeframe.

The manual also has separate timing rules for adding or increasing coverage at renewal, which depend on when the request and payment are received. Confirm the effective date with your agent before relying on coverage.

Private flood rules. Private policies set their own effective-date rules. The NAIC notes that “NFIP and some private flood policies have a 30-day waiting period” and advises asking about the waiting period.

Flood in progress. The reviewed form applies different flood-in-progress tests. For coverage effective at loan closing, it excludes continuation of a flood existing before coverage became effective. Otherwise, it uses the day the application and correct premium were submitted. Review the complete provision before relying on coverage.

Flood maps, risk outside high-risk areas and lender requirements

Flood maps. FloodSmart explains that high-risk areas are shown as A or V zones on FEMA flood maps. Check your locations’ flood zones, and remember that maps change.
Risk outside mapped high-risk areas. TDI says “floods can happen anywhere,” and the NAIC notes that moderate- to low-risk areas can still flood. A lower-risk map designation is not the same as no flood risk.
Lender requirements. Federal flood insurance requirements can apply to commercial as well as consumer loans secured by buildings in Special Flood Hazard Areas in participating communities (FDIC, Flood Disaster Protection Act examination guidance). The applicable lending rules and any exceptions require review. Ask your lender to confirm its requirements.

Meeting a lender’s requirement isn’t the same as adequately insuring your business, and it doesn’t mean every loss is covered. Review your own building, contents and interruption exposures separately.

Multiple buildings and locations

The reviewed form says, “This policy insures only one building.” If you own more than one building, coverage applies to the single building described in the application. If your business has several buildings or locations, confirm for each one whether it has flood coverage, whether building and contents are each insured, which limits and deductibles apply, and where the business contents are kept.

Comparison: property, coverage and questions

Property or exposure	Coverage to review	Questions to ask
Owner’s building	Flood building coverage (NFIP Coverage A or a private policy’s equivalent)	Is the building insured, at what limit and deductible? Which fixtures and equipment are included?
Business contents, inventory and equipment	Flood contents coverage, if purchased	Was contents coverage purchased? Is the property inside the fully enclosed building? What limit applies?
Tenant’s improvements	Tenant improvements provision; the landlord’s policy; the lease	How much of the contents limit can apply to improvements? What does the lease require?
Leased equipment or customers’ property	Contents definition; property not insured; contracts	Does the policy insure property you don’t own? Who is required to insure it?
Basement or below an elevated floor	Basement and elevated-building limitations	Which items in those areas are insured, if any?
Outdoor property and vehicles	Property not insured; other policies	Which outdoor items and vehicles are excluded, and where else could they be insured?
Lost income and extra expense	Flood policy exclusions; any business income option; commercial property policy	Does any policy pay for flood-related income loss or extra expense?
New or increased coverage	Effective-date rules	When will coverage start? Does an exception apply, such as a loan closing?
Multiple buildings or locations	Each building’s policy and declarations	Is each building and its contents separately insured?

Three examples to talk through

These hypothetical examples are for discussion only. Coverage depends on the facts and the actual policy language.

1. A tenant’s inventory is damaged by rising water

A retail tenant’s stock is damaged when nearby water rises into the store. Questions to review:

Does the event meet the policy’s definition of flood?
Did the tenant buy contents coverage, and at what limit and deductible?
Was the inventory inside the fully enclosed building and above any basement?
Were any improvements damaged, and how does the tenant improvements provision apply?
What does the lease say about who insures what?

2. Flooding damages an owner-occupied building and equipment

Floodwater enters a building the business owns and damages walls, a furnace and production equipment. Questions to review:

Which items fall under building coverage, and which under contents coverage?
Was contents coverage purchased?
Does any equipment sit in a basement or below an elevated floor?
How does the valuation provision apply, including depreciation?
Which separate deductibles apply?

3. A business closes after flooding and loses income

A restaurant must close for repairs after a flood and loses income for several weeks. Questions to review:

Does the flood policy exclude loss of revenue and business interruption, as the NFIP form does?
Does any other policy or endorsement provide business income or extra expense for flood?
Does the commercial property policy’s business income coverage depend on a covered cause of loss that excludes flood?

Checklist before you review flood coverage

Locations: list every address, with its flood zone if known.
Ownership: note which buildings you own and which you lease, and who owns improvements and equipment.
Occupancy: describe how each building is used.
Building and contents values: estimate building, inventory, furniture and equipment values for each location.
Elevation or basement details, where relevant: note any basement, elevated building or below-grade equipment, and any elevation documentation you have.
Existing policies: gather your property, BOP, flood and wind policy declarations and endorsements.
Lender requirements: get your lender’s flood insurance requirements in writing.
Interruption exposures: think through lost income, extra expenses and relocation costs if a location closes after a flood.

Sources

About Melliand Insurance Agency

Melliand Insurance Agency is an independently operated insurance agency affiliated with Premier Group Insurance (PGI), a nationwide agency network.

If you’d like help reviewing how your current policies treat flood, call (972) 346-4666 or email melliandinsurance@gmail.com, Monday–Friday, 8 AM–5 PM Central.

This article provides general information only. It is not legal advice, does not determine coverage under any policy, and does not determine whether you meet any lender’s requirements. Coverage depends on the actual policy forms, endorsements, declarations and the facts of a loss. The NFIP form described here is cited as an illustrative example by form and edition. It is not the terms of any particular policy, and private flood policies may differ. For questions about what a lease, loan agreement or contract requires, consult an attorney or your lender.