As climate volatility increases the frequency and unpredictability of extreme weather events, flood risk is expanding well beyond historically designated flood-prone areas. Despite this reality, many property owners continue to underestimate their exposure and vulnerability.
Though flooding is the most frequent and expensive natural disaster in the United States, fewer than 60% of property owners living within designated high-risk zones purchase flood coverage.
Recent policy shifts by the Federal Emergency Management Agency (FEMA) have further heightened concerns around the flood insurance gap. Reductions in federal aid programs, paused flood mitigation regulations, and uncertainty surrounding federal flood programs more broadly place additional pressure on property owners to take proactive steps to protect their investments. Property owners must now navigate a significantly altered risk environment in which federal support and oversight are diminishing at a time when climate-related flooding is becoming more severe.
No Longer Just a Coastal Concern
While conventional wisdom suggests flood insurance is necessary only in areas close to rivers or coastlines, the reality is starkly different. According to FEMA, more than 20% of all flood claims now originate outside federally defined high-risk flood zones. Flooding in lower-risk regions may be driven by heavy rainfall, infrastructure failures, snowmelt and changing climate patterns. The First Street Foundation estimates that roughly 12 million properties outside traditional FEMA-designated flood zones currently face significant flood risk.
Further complicating matters, FEMA flood maps (the primary tools for assessing flood risk) often do not reflect the rapidly changing reality on the ground. Outdated maps based on historical data can provide a false sense of security, underscoring the need for business leaders to proactively reassess flood risk, regardless of their current flood-zone classification.
Addressing Coverage Gaps in Standard Policies
A common misconception among property owners is that traditional commercial property insurance policies automatically provide protection against flood damage. Standard policies typically exclude losses from flooding related to storms, river overflows, groundwater seepage or infrastructure failures. Should a flood event occur, property owners without dedicated flood insurance may be left with significant out-of-pocket costs to repair flood damage.
Moreover, those expecting federal disaster assistance following a flood may be surprised to learn that aid programs often fall short. Federal disaster relief generally consists of low-interest loans or limited grants, not outright coverage. With recent FEMA cuts and the current government shutdown, this already limited assistance may shrink further.
Shifting Federal Support
Recent policy changes at FEMA amplify the urgency for property owners to take proactive risk mitigation measures. FEMA has reduced its workforce by more than 2,000 employees and paused enforcement of the Federal Flood Risk Management Standard (FFRMS)—a regulation designed to ensure damaged infrastructure is rebuilt to higher safety standards. The agency has also suspended the Building Resilient Infrastructure and Communities (BRIC) program, canceling nearly four years’ worth of flood mitigation efforts and rescinding hundreds of millions of dollars in planned investments.
Additionally, uncertainty around the long-term stability of federal flood insurance programs adds another layer of complexity. Historically, Congress has always reauthorized the NFIP, but recurring debates every time the program lapses highlight the need for risk managers to prepare for potential shifts in program structure, funding or availability.
Steps Every Property Owner Should Take Right Now
Proactive preparedness can significantly reduce the risk of devastating financial losses. Here are concrete steps property owners should consider:
1. Review Your Existing Policies: Carefully check the details of your business insurance policies to ensure a clear understanding of exclusions. Standard policies typically exclude flooding, so organizations should assess potential gaps in coverage and, if needed, should consider purchasing dedicated flood insurance.
2. Evaluate Flood Insurance Options: Explore coverage through both the NFIP and private insurers, which may vary in terms of the breadth of protection or more competitive rates. Be sure to assess NFIP limitations. For example, maximum coverage is typically capped at $250,000 for commercial buildings, which may not be a sufficient limit for many businesses.
3. Conduct Your Own Risk Assessment: Relying solely on FEMA maps can be misleading. Use additional resources such as FEMA's digital flood mapping tools and independent analyses from climate risk specialists to get an accurate picture of your property’s exposure.
4. Physically Safeguard Your Property: Implement physical flood mitigation measures like installing sump pumps, elevating electrical equipment, sealing basements and foundations, and using barriers to block water entry points. Even simple precautions like improved drainage or flood-resistant landscaping can make a substantial difference.
Managing Risk Amid Climate Uncertainty
Climate-driven flooding events are becoming both more frequent and more intense, while government programs designed to mitigate their impact face unprecedented uncertainty. Proactive risk management becomes even more critical as responsibility increasingly shifts away from federal resources toward property owners and states—many of which currently lack adequate funding and infrastructure. Property owners who take action now by reviewing their policies, reassessing risk, purchasing comprehensive flood insurance, and undertaking physical mitigation measures can best position themselves to minimize potential coverage gaps and weather any flood incidents.