Days of torrential rain, floodwater pours into the factory: machines submerged, materials ruined, power systems dead. The owner calls the insurer and gets a shocking answer: "your policy doesn’t cover flood." Whether natural disasters are covered depends entirely on the policy you bought.
1. Not all property insurance covers natural disasters
Under the Law on Insurance Business 2022 (08/2022/QH15), coverage follows the contract. Three common types: compulsory fire and explosion insurance — covers only fire/explosion damage (not flood or storm); property all-risks insurance — covers all risks except stated exclusions, and natural disasters (flood, storm) are typically included unless expressly excluded; business-interruption insurance — covers lost profit during recovery (bundled or standalone). A factory holding only compulsory fire insurance gets nothing for flood — the most common and costliest misunderstanding.
2. Exclusions: read before signing, not after flooding
Even "all-risks" has exclusions: damage from poor maintenance; property in known flood zones without preventive measures; depreciation and natural wear; and loss exceeding the sum insured (underinsurance). Many policies also require the insured to take loss-prevention measures — e.g., elevating machinery on flood warning; failure may mean denial or reduction of payment.
3. Claiming after a flood
Notify the insurer within the contractual deadline (usually 24–48 hours); preserve the scene — comprehensive photos and video before cleanup, since hasty clearing destroys evidence; compile a damaged-asset inventory with value documents; cooperate with the insurer’s loss adjuster; for major losses, hire an independent adjuster for cross-checking. If denied, demand a written denial citing the exact clause — the basis for escalation or litigation.
4. Lessons: insure against your real risks
A factory in a low-lying, riverside area holding only fire insurance is seriously underinsured — add all-risks property cover including natural disasters and consider business interruption; periodically revalue insured assets to avoid underinsurance; build a flood-prevention plan (dikes, pumps, elevated equipment) — it cuts real losses and conditions full payout.
This article has been quality-reviewed by the FLAW AI Legal Council
Frequently Asked Questions
Does compulsory fire insurance pay if flood causes an electrical fire?
Possibly — where fire is the proximate cause of the loss (within cover); but pure water-damage remains excluded, needing adjuster apportionment.
Flood from dam release — still a natural disaster?
Still treated as flood/natural-disaster risk in property policies; additionally consider claiming against the irrigation/hydropower operator if at fault in operations or discharge.
What if the insurer delays assessment or payment?
The 2022 Law on Insurance Business sets payment deadlines; the insured may complain, claim late-payment interest and sue.
Are repair costs for salvageable machines covered?
Yes — repair and restoration to pre-loss condition falls within cover, up to the sum insured.
