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Protecting Against Disaster Risks: Why Insurance and Prevention May Be Complements

Topics: Emergency Management, Critical Infrastructure Theory, Policy and Practice,

This paper analyzes the relationship between individual decision-making, and whether or not the decision to purchase disaster insurance trades off with the decision to take preventative measures against disasters. The authors examine data from over 1,000 homeowners in flood-prone areas in New York City to observe the relationship between individuals that purchase flood insurance through the National Flood Insurance Program (NFIP) and those that engage in disaster reduction activities. Ultimately, they find that insurance complements loss reduction when it occurs before flooding, but is sometimes used as a substitute for damage mitigation for imminent floods.

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