To Insure or Not to Insure: How homeowners perceive flood risk

Abstract

Rising sea level combined with more intense hurricanes and winter storms present a serious threat to coastal residents in Massachusetts. A major concern of coastal communities is to protect against flood and erosion and subsequent property loss. Despite the projected rise in coastal hazards, the uptake of flood insurance in coastal communities has been low. In fact, the total number of flood insurance policies on Cape Cod has been declining in recent years, and this significant decline occurs across all Cape communities, which leads to elevated vulnerability under climate change. The proposed study will investigate a wide array of factors affecting homeowner decision-making on climate adaptation under risk and uncertainty associated with coastal hazards. Utilizing survey data, we will identify factors that influence risk perception and protective behaviors, with a focus on investments in flood insurance and in physical protection measures in Massachusetts. The study will be designed to address important policy questions: why coastal homeowners are not insuring, and how to encourage them to consider flood insurance as an effective option to manage their financial risk exposure.