The report by PolicyGenius Home insurance prices are rising even faster than inflation explains how climate change is making homeowners’ insurance more difficult and costly to obtain:
Severe natural disasters
Climate change has increased both the length and severity of the hurricane and wildfire seasons in the U.S., causing many insurance companies to increase rates or stop offering coverage in high-risk areas altogether. When there’s fewer companies doing business in a particular area, the ones left are forced to establish stricter underwriting rules and increase rates on new and existing customers.
Record catastrophe losses
There were 97 natural disasters resulting in $92 billion in insured losses in 2021, according to the Insurance Information Institute (III). This is up from 92 events totaling $74 billion in losses in 2020. As a result, insurers have had to increase rates to account for higher reconstruction costs in affected areas, and to make up for the record losses.
Without decisive action to mitigate climate change, frequent droughts will threaten jobs and agricultural yields in Oklahoma and Texas; extreme heat will devastate an already high proportion of vulnerable residents in Mississippi and Kentucky; and the number of homes with flood risk will increase significantly in Louisiana and Delaware, according to our 2021 Policygenius Best & Worst States for Climate Change Index.
Last October, FEMA revamped its program to more accurately assess flood risk, causing insurance premiums for some coastal properties to rise to $4,000 or $5,000 annually, up from just $700 or $800, Porter from First Street Foundation said.
These hikes may be prohibitively expensive for lower-income families or retirees, especially those who may be living in a property inherited from family, Wright said.
“These family houses have been around forever, and they may not have a mortgage, so flood insurance may not be required,” he said. “But they should have it anyway.”
More articles on Flood Insurance, Extreme Weather Events and Global Warming.