4 ms·

If Insurance is priced right who cares. Your insurance factors in the risk of loosing the home, and should ensure the insurance company always wins long term.

wongarsu 8y ago
Normally I agree with you, but I am told in the US flood insurance is basically a government fund and doesn't operate like a private profit-seeking insurance at all. This leads to weird cases where people just rebuild in the same place in full knowledge that they will rebuild again in a few years, with flood insurance covering the expense.
- zdragnar 8y ago
  The premiums for flood insurance can be pretty steep, and I would be extremely surprised if the fund operated at a loss. In my case, the annual premium is a little over 1% of the covered value, even though the historical record high (back in the 1960's) would probably only require about 10% of the total coverage purchased to replace (in this case, mostly from a few out buildings that are a little lower than the house itself).
  - bronson 8y ago
    Then you're extremely surprised. "Currently, the NFIP’s debt totals $24.6 billion, nearly six times the program’s total annual receipts of $4.3 billion" https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53028-nfipreport2.pdf https://www.cbo.gov/system/files/115th-congress-2017-2018/re... And Planet Money, as always, has a great take: https://www.npr.org/sections/money/2017/09/29/554603161/episode-797-flood-money https://www.npr.org/sections/money/2017/09/29/554603161/epis...
    - zdragnar 8y ago
      After doing some more digging, it turns out that roughly 20% of NFIP policies are subsidized, and the up-to $30b debt was authorized by Congress in 2012 due to the shortfalls. 80% of the policies (the non-subsidized ones) are thought to be actuarially sound, barring unintended consequences of out-of-date flood maps. So, I'm not terribly surprised. Were it operating like a traditional insurer, it might even be doing fine (especially if it had some other reforms such as eliminating or having better oversight over WYO policies).
- cobookman 8y ago
  "If insurance is priced right..." Aka if we priced insurance at the right level. You'd likely see people stop buying homes on some of these flood plains. As insruance would cost too much.

wongarsu 8y ago

Normally I agree with you, but I am told in the US flood insurance is basically a government fund and doesn't operate like a private profit-seeking insurance at all. This leads to weird cases where people just rebuild in the same place in full knowledge that they will rebuild again in a few years, with flood insurance covering the expense.

zdragnar 8y ago
The premiums for flood insurance can be pretty steep, and I would be extremely surprised if the fund operated at a loss. In my case, the annual premium is a little over 1% of the covered value, even though the historical record high (back in the 1960's) would probably only require about 10% of the total coverage purchased to replace (in this case, mostly from a few out buildings that are a little lower than the house itself).
- bronson 8y ago
  Then you're extremely surprised. "Currently, the NFIP’s debt totals $24.6 billion, nearly six times the program’s total annual receipts of $4.3 billion" https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53028-nfipreport2.pdf https://www.cbo.gov/system/files/115th-congress-2017-2018/re... And Planet Money, as always, has a great take: https://www.npr.org/sections/money/2017/09/29/554603161/episode-797-flood-money https://www.npr.org/sections/money/2017/09/29/554603161/epis...
  - zdragnar 8y ago
    After doing some more digging, it turns out that roughly 20% of NFIP policies are subsidized, and the up-to $30b debt was authorized by Congress in 2012 due to the shortfalls. 80% of the policies (the non-subsidized ones) are thought to be actuarially sound, barring unintended consequences of out-of-date flood maps. So, I'm not terribly surprised. Were it operating like a traditional insurer, it might even be doing fine (especially if it had some other reforms such as eliminating or having better oversight over WYO policies).
cobookman 8y ago
"If insurance is priced right..." Aka if we priced insurance at the right level. You'd likely see people stop buying homes on some of these flood plains. As insruance would cost too much.