Improving the Post-Flood Financial Resilience of Lower-Income Households through Insurance

Flooding is the costliest natural disaster and the risk is escalating in many places due to the combined effects of sea level rise, changing storm patterns, and increased development. Prior research has found that lower-income groups and minorities suffer disproportionately from disasters and recover less quickly than more privileged residents. Current policies and programs are not effectively meeting the post-disaster financial needs of these households. As many municipalities around the country face escalating flood risk in the coming years, new policies are needed to secure the post-disaster financial resilience of low- and moderate-income (LMI) households.

This brief presents six policy options for local governments to harness the benefits of insurance to help achieve this goal. The policy options are aimed at improving the financial resilience of homeowners. While many of the policies could also be tailored to renters, additional policies, such as to help landlords repair structures and ensure the availability of affordable housing post-disaster, will also be needed. Achieving climate resilience requires a suite of interlocking policies: this brief discusses but one piece of that puzzle.

KEY FINDINGS

• Low- and moderate- income (LMI) households and communities suffer disproportionately from disasters, but there are a few policies or programs to help them achieve post-disaster financial resilience. 
• This brief is intended to help policymakers begin the conversation about what new or supplemental policies could help LMI households in at-risk areas. In particular, it explores the critical role insurance can play in securing financial resilience.
• Policy options explored include: (1) parametric microinsurance, (2) premium reductions for low-cost flood mitigation, (3) local flood insurance affordability programs, (4) community assistance combined with a high-deductible NFIP policy, (5) community-based insurance, and (6) right-sizing insurance coverage.