This report from Reuters says that less than .5% of the homeowners in "the state's flood-stricken west" have flood insurance.

They put a couple on camera who were initially required to have flood insurance by their mortgage company, but after the flood maps were redrawn, they were no longer required to have it by the bank, and so they dropped it.

They don't say when they were no longer required to have it, just that they were required to have it for the first three years of their mortgage. The husband stated, "We're not wealthy people, so we opted out of that coverage."

Later in the report, the wife says something to the effect, "if it's $600 a month, and you have a mortgage on top of that."

The report is confusing and misleading. At some point, they could afford flood insurance, because for the first three years they did. Supposedly after the flood maps were redrawn, they were no longer required to have it, so presumably the risk was considered lower.

Now, flood insurance rates have bounced around in the last fifteen years or so. Congress mandated that FEMA make NFIP rates "actuarily sound," which meant raising them significantly, like 200-300% or more in some cases. Constituents screamed, and they revised the requirement. So I suppose it's possible that at some point they looked at flood insurance rates and were quoted $7200/year ($600 a month).

I doubt that, but I don't know where she's getting that figure. My premium in a "low risk" area is only $1000 a year. I suspect theirs would have been about that, or less.

In any event, it's a familiar argument. When I was president of our condo association board, I insisted we buy flood insurance every year. We weren't in a "flood zone," as every condo owner who scrutinized the budget for wasteful spending liked to point out. But we were less than a mile from the beach and between the ocean and the Intra-Coastal Waterway.

We could afford flood insurance. What we couldn't afford was a flood loss.

"We're not wealthy people," is an admission that you're exactly the people who should be buying insurance.

And if you can't afford the insurance, then you can't afford to live there!

This has been the great "moral hazard" of the NFIP. The rates don't reflect the risk, so people make calculations based on bad data. Our flood insurance premium has been going up more than the rate of inflation every year. I believe FEMA is trying to get rates closer to being "actuarily sound." I expect them to continue to go up every year. At some point, they may tip the scale regarding whether we stay here or not.

But, by then, I think it'll be past the optimal time to leave.

I think now is the best time to get out of here.

Before everyone else realizes it too.

Originally posted at Nice Marmot 10:40 Friday, 4 October 2024