Who purchases flood insurance, and why? Evidence from the Hudson valley

Abstract

In the United States, increasing the number of homeowners insured through the National Flood Insurance Program (NFIP) is a key goal in federal and state efforts to manage flooding impacts. This study draws on a survey of households in the Hudson valley of New York State to examine which households insure and how different homeowners view insurance, examining patterns across homeownership status as well as location inside or outside federally designated Special Flood Hazard Areas (SFHAs). Flood insurance take-up was highest among mortgage-holding homeowners living in SFHAs, who are required to purchase flood insurance. Majorities of both insured and uninsured homeowners expressed low confidence that they could pay for flood damage on their own and low confidence that the NFIP would cover costs of flooding. Many, including over one-fifth of those living in high-risk areas, see their risk of flooding as low enough to merit not insuring. Understanding flood insurance behavior and encouraging preparedness requires addressing how people in varied situations evaluate cost, risk perception, and trust in institutions.