Wind Insurance and Mitigation in the Coastal Zone

This paper presents the only study analyzing the decision to purchase wind coverage for individuals whose standard homeowner's policy excludes wind, and one o f very few analyses o f the decision to undertake wind mitigation measures. Because these two decisions are closely related, a simultaneous mixed-process approach is used that allows for correlated disturbances across prohit (insurance) and tobit (mitigation) equations. Results indicate a positive correlation between errors of the insurance and mitigation models; conditioning on covariates, households that hold wind insurance tend to engage in greater levels o f wind mitigation