LitScan TrendWatch 4. Insurance is the sharing of risk.
Individuals pay an annual premium to protect their property, crops or life.
These funds are pooled, and used to reimburse the few individuals who suffer from unusual or catastrophic events. In effect, those contributors who are financially hit are compensated by all those who are not. The trouble with flood insurance is that floods are relatively predictable, if your house is in a flood-plain, it is likely to get flooded in a flood, and if it isn't, it won't. So if you do live in a flood-prone area, you are unlikely to get flood insurance except at a ridiculously high price, and if you don't, you probably don't need it. Not surprisingly, in many countries flood insurance is not available on the consumer market.