What Types of Water Damage Does Commercial Insurance Cover?

If you own a business, water damage can close your doors and cause serious losses to your inventory. It can lead to mold and contamination of your entire commercial site.

Does insurance cover water damage? Commercial insurance can help you pay for some of the costs of water damage, but only some situations are covered. You’ll want to understand the risks of water damage and understand your policy to have a sense of what is and isn’t covered.

What Are the Different Categories of Water Damage?

The IICRC Standard for Professional Water Damage Restoration establishes three categories of water damage:

  • Category 1 water damage: Also known as “clean water,” this water is uncontaminated.
  • Category 2 water damage: Also known as “gray water,” this water is substantially contaminated with mold, bacteria, viruses, or other contaminants that can cause illness or discomfort with exposure. 
  • Category 3 water damage: Also known as “black water,” this water is heavily contaminated and poses a risk to human health.

With time, even if water damage is Category 1, it can become Category 3 if it’s allowed to sit, which is why it’s important to address any leaks, burst pipes, or other issues quickly.

What Types of Water Damage Does Commercial Insurance Cover?

In general, commercial property insurance covers damage caused by hail, wind, vandalism, and some other causes of water damage. Some policies can also cover unexpected burst water pipes that aren’t caused by floods, wear and tear, or negligence. Most commercial insurance doesn’t cover flood damage. If you’re in a flood zone, consider purchasing additional commercial insurance coverage for flood damage.

Ultimately, every policy is different. Some policies offer water damage coverage for HVAC leaks and other causes. Others allow you to add water damage coverage to an existing commercial property policy. Because anything from a faulty toilet to a leaky roof can cause mold and property damage, extra protection is an important way to protect your commercial enterprise.

Overall, your policy may cover some water damage but not all. Review your policy with your insurance agent or broker and consider additional coverage for water damage.

Recovering After Water Damage

If your business has been impacted by water damage, time is of the essence. The longer you wait to address the damage, the more likely you are to develop mold and other issues that can impact indoor air quality and damage your inventory. 

Businesses in Arizona and Washington can contact us at Alliance Environmental for emergency water damage mitigation. Our team has over 100 years of experience, is certified, and can respond quickly to reduce the risk of additional damage to your property.

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