A fully paid-off home may seem to be a symbol of financial stability. And in many ways, it’s undoubtedly a vital safety net.
“It’s wealth that you could draw from to pay for medical treatments. It could be passed down to children,” said Jonathan Nelson, an assistant professor of environmental studies at the Rhode Island School of Design. “It’s sort of a backdrop for the worst things that could happen.”
But while a home can ensure financial stability, the structure itself may face increased uncertainty with extreme weather events on the rise.
And “what a flood does,” Nelson added, “is potentially wipe that [home] out in just a couple hours.”
Ideally, flood insurance provides homeowners with protection from a total loss. But for some, that coverage is increasingly out of reach.
Recent data from the Federal Emergency Management Agency shows that following the implementation of a new flood rate formula last October, around 10% of Rhode Islanders have opted to drop their flood insurance coverage between Dec. 31 and July 31 of this year.
This statistic isn’t surprising to Nelson, whose research specializes in community adaptation to flooding. His analysis of the most recent flood insurance coverage data shows that about 10% of flood insurance policies in the state increased by more than $120 per year.
And even in known flood zones, increasing premiums can turn flood insurance into a luxury that some Rhode Islanders can’t afford.
“Households look for the things they can cut in their budgets, and if it’s either keeping gas in their car and keeping their lights on or flood insurance, I know what I’m going to pick,” Nelson said. “It’s bad timing with the inflation we’re having, and it’s interacted with that to lead to quite a drop in coverage.”
In the fall, FEMA devised a new formula for calculating flood insurance rates, which the agency said would increase premiums overall but would nevertheless raise coverage rates and mitigate expenses for lower-cost homes, compared with pricier coastal properties.
But in July, a report obtained by the Associated Press revealed that FEMA estimates that 1 million fewer Americans will have flood insurance by 2030, and that many of the people who will drop these policies are at high risk for “catastrophic financial loss” due to flood events.
The drop in insurance coverage hasn’t been uniform across the state, in part because a large portion of homes in flood zones are required by mortgage lenders to have flood insurance.
Bruce Messier, president of Butler & Messier Insurance in Pawtucket, says that his agency hasn’t noticed a significant change in its number of active flood insurance policies.
“For the most part, if your mortgage or bank isn’t requiring you to have it, most individuals don’t purchase it,” Messier said. “Obviously, there are some who are trying to have that exposure covered but since banks require it to have a mortgage, most people aren’t dropping their flood insurance.”
Most properties Butler & Messier covers also aren’t within the state’s high-risk areas for flooding.
“Most of the business we write is not in a flood zone,” Messier said, “and when you’re not in a flood zone, the premiums tend to be more manageable.”
But due to climate change and resulting extreme weather events, some locations that typically weren’t considered flood zones are becoming higher-risk areas.
Some shoreline municipalities weren’t particularly hard-hit by rate changes, Nelson noted – in fact, waterfront communities such as Newport, Portsmouth and the Oakland Beach neighborhood of Warwick had some of the largest premium decreases under FEMA’s new policies.
But others, such as Charlestown and Tiverton, took a harder hit.
“It’s hard to pick out a really clear pattern from this,” Nelson said.
FEMA’s claim that one of its new programs, Equity in Action, will reduce costs for some residents isn’t false, Nelson said, with some premiums decreasing by $1,200 annually.
“The one thing that is quite impressive is how the policy decreases correlated with the average replacement value for a home, and that’s one of the criteria [FEMA] uses to do this new rate-setting exercise,” he said.
Still, with the current information FEMA has made available, it’s difficult to fully evaluate the degree to which Equity in Action lives up to its name, Nelson said.
Additionally, the federal government has done little outreach to inform people in high-risk communities about potential decreases to their flood insurance premiums, he added.
While some residents continue to face barriers to affordable flood insurance, Nelson says it’s worthwhile to talk to an insurance agent about coverage rates and any price changes.
“I would tell folks that if you’ve talked to an agent before about flood insurance and thought it was too expensive, it’s worth checking again,” Nelson said, “because a lot of properties have seen a very significant decrease thanks to this program.”
