Property loss due to flooding,
like what happened in Milwaukee, is
likely not covered by the standard
homeowners insurance policy.
It would be covered up to a point
under flood insurance.
But according to the State Insurance
Commissioner's 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, Frederica, 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. That can be on
the low end. You know, $300, $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 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.
Are 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can often out of date.
These are updated over time by
the U.S. Army Corps of Engineers
through studies, but that process is
supposed to be done every five
years, but often flood maps can
be more than a decade out of dates.
Even when they are updated, they
don't always do a rigorous study.
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out of date.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
you're low risk, and another set of
information may be telling you that
you're high risk.
And so what should the homeowner do?
Well, 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 at the end of the
day, this probably seems like
throwing even more
information at the homeowner.
I think looking
into what the NFIP is
charging you, this is the National
Flood Insurance Program,
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 one in a
thousand 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, you, know, get
insure against that.
The other thing, too, is, you know,
when we talk about things like a
thousand year or a 100 year flood,
that's a very...
A tricky concept to wrap
our heads around it does not mean
that this will only happen once
every thousand years.
There's thousand 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 gonna be able to
find some different types of
coverage on the market.
So 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 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 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.
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 insurance?
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 the 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 flood point.
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, 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, 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.
Flood insurance is really for
dealing with the worst-case
scenarios. I know that a
$10,000 or $20,000 loss can be
financially catastrophic to
families.
But ultimately, what
flood insurance is for is
even bigger losses, potentially the
kind flooding that could ruin your
entire home.
Well, Philip Mulder, thank you.
Thank you so much for the
information.
Thank you, it was my pleasure.
As another school year quickly
approaches, we have an update on
lead contamination in Milwaukee
Public Schools.
Here and now reporter Stephen Potter
has this report.