All-Hazards Homeowners Insurance: Challenges and Opportunities

Resources for the Future Discussion Paper 17-08

24 Pages Posted: 11 Apr 2017

See all articles by Howard Kunreuther

Howard Kunreuther

National Bureau of Economic Research (NBER); University of Pennsylvania - Wharton Risk Management and Decision Processes Center

Multiple version iconThere are 2 versions of this paper

Date Written: February 16, 2017

Abstract

In the United States, standard homeowners insurance policies cover damages resulting from fire, wind, and hail, but exclude damages caused by floods and earthquakes. This is not the practice worldwide: several countries include all perils in homeowners insurance. Building on two fundamental insurance principles — that premiums reflect risk and that support for low-income households come from public funding, not insurance premium subsidies — this paper proposes a strategy for developing an all-hazards homeowners insurance policy in the US that should be attractive to both private insurers and property owners. It outlines critical supporting roles for the public sector and proposes modifications to the National Flood Insurance Program that could provide a foundation for all-hazards insurance.

Keywords: homeowners insurance, disaster, premiums

Suggested Citation

Kunreuther, Howard C. and Kunreuther, Howard C., All-Hazards Homeowners Insurance: Challenges and Opportunities (February 16, 2017). Resources for the Future Discussion Paper 17-08, Available at SSRN: https://ssrn.com/abstract=2891369 or http://dx.doi.org/10.2139/ssrn.2891369

Howard C. Kunreuther (Contact Author)

University of Pennsylvania - Wharton Risk Management and Decision Processes Center ( email )

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National Bureau of Economic Research (NBER)

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