Is it time to get rid of federal flood insurance?
Honest question on my part. This is one of those ideas that seems simple on its face but rapidly becomes extremely complicated once you try to place the question in our reality.
Doing away with flood insurance would effectively mean that any middle class person or poor person who lives near the coast could have their entire wealth swept away in a freak storm and end up penniless and homeless and still on the hook to the bank for the home loan for the home they no longer own.
Should we force private insurers to offer flood insurance at a cost people could afford? How could that possibly be better than the feds doing it?
It seems to me that as long as people live by water (which is most people in America) then we will need flood insurance. Especially as the seas continue to rise.
You read that right: $527 billion, which is just a portion of the program’s overall liability of $1.25 trillion, second only to Social Security in the liabilities on the government’s ledgers last year, according to government data.
The flood insurance program was created by Congress in 1968 to fill a void: because of the risk, few carriers provided flood insurance. Now, private insurers offer flood insurance in a partnership with the government — but taxpayers shoulder all the risk. It has turned out to be a bad bet. The program is $18 billion in debt, a sum the government acknowledges probably will never be paid back by premiums, and it is likely to need a new multibillion-dollar infusion to pay claims from Hurricane Sandy. It is long past time for the government to stop subsidizing home and business owners who live and build in dangerous flood zones.
Homeowners and businesses should be responsible for purchasing their own flood insurance on the private market, if they can find it. If they can’t, then the market is telling them that where they live is too dangerous. If they choose to live in harm’s way, they should bear the cost of that risk — not the taxpayers. Government’s primary role is ensuring the safety of its citizens, so the government’s subsidizing of risky behavior is completely backward.
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