When the Mortgage Becomes the Backup Plan: Debt and Disaster Insurance

Toan Phan

Richmond Fed Economic Brief, 2026, vol. 26, issue 22

Abstract: Debt crowds out flood insurance, as homeowners with little equity have less to lose from default, making their mortgage an implicit backup plan that substitutes for formal coverage. Uninsured exposure is highest in the riskiest areas, precisely where flood damage is most likely. After Hurricane Harvey, uninsured homeowners defaulted three times more often than the regular default rate.

Keywords: housing; and; housing; finance (search for similar items in EconPapers)
Date: 2026
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