USI's FloodSafe Program: A Sound Alternative to FEMA’s National Flood Insurance Program

MAY 2, 2023

Floods are the most common and costly natural disaster in the United States, with 40% of small businesses never reopening their doors and 90% failing within two years¹ following a major flooding event. Commercial property insurance policies typically exclude flood losses, despite most banks requiring borrowers to have flood coverage. Businesses with property located 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) — but USI Insurance Services’ exclusive FloodSafe program offers a better alternative with broader coverage, increased limits, and competitive pricing.

Many property owners feel they only need to buy flood insurance if it’s required because 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 United States each year.  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, it happens all across the U.S., all the time, with 99% of counties being impacted.⁴
2. They should only buy flood insurance if they’re required to — by a mortgage lender for example. The fact is, property owners shouldn’t depend on others’ requirements to dictate how they protect their own property and assets.

What’s contributing to the flood problem:

• Rainstorms are becoming more severe – the Eastern United States now has up to 70% more heavy downpours each year.⁵
• Rising sea levels – more flooding during high tides, hurricanes, and rainstorms.
• Rising sea temperatures – fuel bigger, slower, and wetter offshore storms and hurricanes that can reach further inland.⁶
• Over-development with impervious surfaces – dramatically decreases natural drainage and creates excess runoff.⁷
• Most places in the U.S. rely 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 a majority of flood victims were uninsured⁹ for these well-known flooding events — leaving them in very costly and stressful situations:

What Are the Advantages of Private Flood Insurance?

USI’s exclusive FloodSafe program offers many enhancements not available through NFIP, such as:

• Up to 10X the commercial limit
• Coverage for business income interruption on commercial policies
• Combined multiple locations on a single policy
• More affordable rates for policyholders
• Replacement cost valuation instead of actual cash value (which includes depreciation when valuing losses)
• Lenders are required to accept our program, which results in a smooth transition for those already carrying flood coverage

USI’s exclusive FloodSafe program can help businesses reduce uncovered losses and out-of-pocket claims expenses up to an additional $4 million.

Coverage Scenario
Our client, a commercial property owner, had obtained flood insurance through NFIP with its $500K limit. After switching to USI’s exclusive FloodSafe program, their building limit increased to $2M and they were able to add $1M in Business Income coverage – not available through NFIP – for slightly more premium than their previous NFIP policy.