Bill’s house has flooded three times since he’s lived there, and by now he’s getting used to it. Why not move? Insurance!
You can’t really get private insurance for floods, because it’s too correlated. When the company has to pay out for one person, it has to pay out for everyone, and it goes bankrupt. So this insurance is backed by the government. He pays something like $4k/year for a house that cost him under $500k, and its paid out over $800k so far. That’s not counting the most recent flood, after which it’ll be over $1m. (I don’t remember if this counts the twice it flooded before Bill bought the house.)
The government body in charge of things like this nominally tries to take in more in premiums than it pays out, for a while it even succeeded, but it basically doesn’t work. Part of this is because America is generally down on mandated insurance, and only a relative handful of people have this insurance. Bill is a gun-owning, libertarian-leaning Texan, but he still thinks people should be required to buy flood insurance.
The body in question has borrowed more and more money from some other government body to make up for the shortfall. Ostensibly it’ll pay it back but it’s just going to fall to taxpayers eventually. (One of these bodies is FEMA, I forget which.) It’s not allowed to refuse to insure someone, and while it has some control over how much it charges, congress also has a lot of control.
The body also tries to encourage things like “building your house more resilient to floods, like on stilts” and “moving away from flood prone areas”, but the cheap insurance kind of doesn’t help on that front. Bill actually wants to put his house on stilts, but hasn’t been able to get a grant for doing that yet.
Planet Money: Flood Money
Bill’s house has flooded three times since he’s lived there, and by now he’s getting used to it. Why not move? Insurance!
You can’t really get private insurance for floods, because it’s too correlated. When the company has to pay out for one person, it has to pay out for everyone, and it goes bankrupt. So this insurance is backed by the government. He pays something like $4k/year for a house that cost him under $500k, and its paid out over $800k so far. That’s not counting the most recent flood, after which it’ll be over $1m. (I don’t remember if this counts the twice it flooded before Bill bought the house.)
The government body in charge of things like this nominally tries to take in more in premiums than it pays out, for a while it even succeeded, but it basically doesn’t work. Part of this is because America is generally down on mandated insurance, and only a relative handful of people have this insurance. Bill is a gun-owning, libertarian-leaning Texan, but he still thinks people should be required to buy flood insurance.
The body in question has borrowed more and more money from some other government body to make up for the shortfall. Ostensibly it’ll pay it back but it’s just going to fall to taxpayers eventually. (One of these bodies is FEMA, I forget which.) It’s not allowed to refuse to insure someone, and while it has some control over how much it charges, congress also has a lot of control.
The body also tries to encourage things like “building your house more resilient to floods, like on stilts” and “moving away from flood prone areas”, but the cheap insurance kind of doesn’t help on that front. Bill actually wants to put his house on stilts, but hasn’t been able to get a grant for doing that yet.