luck. >> Thank you so much for
having me. >> Property loss due to
flooding, like what happened in Milwaukee is likely not
covered by the standard homeowner's insurance
policy. It would be covered up to a point under flood
insurance. But according to the state Insurance
Commissioners Office, Wisconsin has one of the
lowest number of flood insurance policies in the
nation, at under 11,000 of more than 2.7 million
households. Our next guest researches flood insurance
costs and benefits as assistant professor in the
Risk and Insurance Department at the Wisconsin
School of Business. Philip Mulder joins us now. And
thanks for being here. >> Thank you, Frederic.
Happy to be here. >> So what's the explanation
for why so few people hold flood insurance? Do they not
know that they need it? >> I think that it's a
variety of cases. You know, on the one hand, especially
in a state like Wisconsin, where we're not used to
thinking of floods as a regular risk, a lot of
people don't do the due diligence that you would
need to discover that your homeowner's insurance policy
doesn't cover that peril, right? You may be told that
as you buy the policy, but maybe you forget over time,
or you don't notice as you're kind of finalizing
the details. In other cases, maybe people do know that
flood isn't covered, but it is an extra cost. It can be
on the low end, you know, three $400 a year on the
high end. If you are in a high risk area, maybe even
thousands of dollars a year for a lot of households
that's outside of their immediate budget, especially
if flooding isn't top of mind as a as a potential
risk. >> Certainly top of mind
right now, right after what happened in Milwaukee. But I
put a Milwaukee address that did experience flood damage
into the flood risk calculator, and it came out
as low risk. Our flood maps accurate. And have they
changed recently? Do they change a lot?
>> The information that we have about flood risk can
often be, I think confusing to the typical household.
It's sort of important to break down what might be out
there. On the one hand you have sort of what we've
always called flood maps, which are made by FEMA, and
those can often be out of date. These are updated over
time by the US Army Corps of Engineers through studies.
But that process can is supposed to be done every
five years, but often flood maps can be more than a
decade out of date, even when they are updated, they
don't always do a rigorous study. So. So yes, that
information is often out of date, even if you're not in
an official floodplain, your home may have substantial
risk. The National Flood Insurance Program is using
newer information now to price policies based on risk
rating 2.0, but that can be very difficult for
homeowners to learn about. So sometimes you'll see
information on the flood map that tells you your low risk.
And another set of information may be telling
you that your high risk. >> And so what should the
homeowner do? >> Well, you know, it's
important to sort of take a holistic view of everything
that you can do to learn about your risk. There's
also third party tools out there, like First Street
Foundation. I understand that the end of the day,
this probably seems like throwing even more
information at the home owner. I think looking into
what the Nfip is charging you, this is the National
Flood Insurance Program. You know, that premium is based
off of their best estimate of your risk. If you're
being charged a high premium, it's probably
because you have high risk. And it seems to me that some
people might explain away risk in Wisconsin by saying
what happened in Milwaukee was a thousand year flood.
It's not going to happen again.
>> Well, you know, I mean, a 1 in 1000 chance of having
your home ruined is a substantial risk, right?
That's what flood insurance and insurance in general is
for, is to take something that yes, it's unlikely, but
if it were to happen, could be catastrophic. And to and
to, you know, get insure against that. The other
thing too is, you know, when we talk about things like
1000 year or a 100 year concept to wrap our heads
around. It does not mean that this will only happen
once every thousand years. There's 1000 year floods
every year somewhere in the country, right? And in
addition, what is a thousand year flood? That's something
that we can only estimate and that we think is
changing with changing weather patterns.
>> So if you buy a flood insurance policy, maybe
you're not even in a high risk area, but maybe you
just want to be covered. Does that then cover for
replacement, or are they all different?
>> You are probably going to be able to find some
different types of coverage on the market. So, you know,
I've thrown out the term nfip, the National Flood
Insurance Program that is a federally run insurer, and
they are the primary provider of flood insurance
in the United States and including Wisconsin. They
will sell you up to $250,000 of coverage. A lot of homes
that will not cover the full replacement cost, but for
some of the smaller floods, maybe primarily affect the
lower levels of a home, which which are more typical
in Wisconsin, you might be able to get enough coverage.
Now, there's also private providers of flood
insurance, and there you might be able to find more
coverage options and things that can cover more
expensive homes. It's always important to talk things
through with an agent or a broker. Understand
differences between actual cash value, replacement cost
value policies. You know, these these can definitely
be tricky concepts. >> So given torrential rain
events that are on the increase, should we all just
assume that we need flood >> You know, it's I think
it's a decision that every household has to make for
itself. What I hope is that people can go in with full
information. I think that often people assume that
they have low risk because they're not in a floodplain.
That's not always going to be true. People will say
things like, oh, I can't get flood insurance. I'm not in
a floodplain. That's not true. The National Flood
Insurance Program will sell flood insurance in almost
every community. As a participating nfip
community, that means you can buy flood insurance
inside or outside of the floodplain, so people should
understand their options. Now there's other steps you
can take some pumps in your basement, elevating homes
that are near waterways, keeping a buffer of savings.
If you only face small, say, basement damages, you know,
these are other tools that homeowners can use to handle
flood risk. But flood insurance is definitely one
of those tools, and households should take a
look at their budgets and see if that makes sense.
>> If you put a sump pump or other measures like that in
your basement, does that reduce the cost? If you buy
flood insurance? >> Not in every case. And in
addition, you know, some things are excluded through
flood insurance policy. So basements in many cases you
might be on your own altogether, certainly for,
say, covering the contents down there, you know, flood
insurance is really for dealing with the worst case
scenarios. I know that, you know, a 10 or $20,000 loss
can be financially catastrophic to families,
but ultimately, what flood insurance is for is even
bigger losses, potentially the kind of flooding that
could ruin your entire home. >> Wow. Well, Philip Mulder,