Know Your Alternatives to FEMA’s National Flood Insurance Program

MARCH 4, 2025

Floods are the most common and costly natural disaster in the U.S. — 40% of small businesses never reopen their doors and 90% fail within two years after a major flooding event.¹ Commercial property insurance policies typically exclude flood losses, despite most banks requiring borrowers to have flood coverage.

Businesses with property in flood-prone areas usually rely on the National Flood Insurance Program (NFIP) for flood insurance, which is managed by the Federal Emergency Management Agency (FEMA). However, the private marketplace offers alternative programs with broader coverage, increased limits, and competitive pricing, such as with USI Insurance Services’ exclusive FloodSafe program.

Many property owners think they only need to buy flood insurance if their property is in a high-risk flood zone. However, history shows that Mother Nature isn’t bound by lines on a map, and floods often occur outside FEMA’s designated “special flood hazard areas.” In fact, FEMA reports that between 2015 and 2019, more than 40% of the claims filed with NFIP were from policyholders outside of high-risk areas.²

While major hurricanes and other named storms receive the most public attention, many other significant flood events (including urban flooding from rainstorms) impact the U.S.  A joint survey by the University of Maryland and Texas A&M University revealed that 83% of respondents had experienced urban flooding in their communities.³

Two costly misconceptions businesses have regarding flood insurance:

1. Flooding only occurs near the coast or next to rivers. In reality, weather-related flooding happens all across the U.S., all the time, with 99% of counties being impacted.⁴
2. Businesses should only buy flood insurance if they’re required to — by a mortgage lender, for example.

What’s contributing to the flood problem?

• Rainstorms are becoming more severe — the Eastern U.S. now has up to 70% more heavy downpours each year.⁵
• Rising sea levels means more flooding during high tides, hurricanes, and rainstorms.
• Rising sea temperatures fuel bigger, slower, and wetter offshore storms and hurricanes that reach further inland.⁶
• Overdevelopment using impervious surfaces dramatically decreases natural drainage and creates excess runoff. ⁷
• Most of the U.S. relies on stormwater infrastructure built almost 100 years ago.⁸

Whether required to purchase flood insurance or not, businesses can benefit from working with a broker experienced in flood risk, like USI. The chart below shows that most flood victims were uninsured for these well-known flooding events — leaving them in very costly and stressful situations:⁹