Climate change is making some homes too expensive to insure

Firefighters pull up to a burning house during the Kincade fire in Healdsburg, California, on October 27, 2019.

Josh Edelson | Afp | beautiful pictures

As climate change threatens America with more natural disasters, home insurance is becoming more and more expensive for Americans —and it can only get worse, according to experts. , according to experts.

“These things happen more often, and they cause more damage,” said Jeremy Porter, research director at the First Street Foundation, a nonprofit focused on identifying US climate risks. more harmful.

Indeed, there was 20 separate US billion-dollar natural disasters in 2021 – including deep freezes, wildfires, floods, tornado outbreaks and other extreme weather – cost a total of $145 billion, according to National Oceanic and Atmospheric Administration.

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An increase in costly climate events, combined with increased cost to rebuildLabor shortages and “surge in demand” after natural disasters have led to higher homeowners insurance premiums, experts say.

“We are seeing a strong increase,” said Pat Howard, managing editor and licensed home insurance specialist at Policygenius.

About 90% of U.S. homeowners saw premiums increase between May 2021 and May 2022, costing an average of $134 more per year, according to a report. Policy report.

The average increase was 12.1% nationally from a year ago, but the increase was higher in disaster-prone states like Arkansas, Washington and Colorado, the report found.

Some homeowners are at risk of flooding

Water-damaged items lie outside a home in Squabble Creek, Kentucky, on July 31, 2022, following historic flooding in Eastern Kentucky.

Seth Messenger | Afp | beautiful pictures

These family homes have been around forever, and they may not have a mortgage, so flood insurance may not be needed.

Brad Wright

Managing Partner of Launch Financial Planning

Standard homeowners insurance policies do not cover flooding, but protection is available through FEMA or private insurance, which may be required by the mortgage lender. While the average annual premium is $985, according to ValuePenguinExperts say the costs can be significantly higher in high-risk areas.

Last October, FEMA has improved its program to more accurately assess flood risk, causing premiums for some coastal properties to rise to $4,000 or $5,000 per year, up from just $700 or $800, said Porter of the First Street Foundation.

These increases can be very expensive for lower-income families or retirees, especially those who may be living in an inherited property, Wright said.

“These family homes have been around forever, and they may not have a mortgage, so may not need flood insurance,” he said. “But they should have it anyway.”

Wildfire risks can be expensive to insure

Flames burn during the McKinney Fire in Klamath National Forest on July 31, 2022.

David Mcnew | AFP | beautiful pictures

If you move into an area prone to wildfires or floods, that cost goes up dramatically because the service provider is passing that on to the consumer.

Bill Parrott

President and CEO of Parrott Wealth Management

Bill Parrott, an Austin, Texas-based CFP and president and chief executive officer of Parrott Wealth Management, has also seen premiums rise in high-risk areas.

“If you move into an area prone to wildfires or floods, that cost goes up dramatically because the service provider is passing it on to the consumer,” he said. “That’s a huge expense for a lot of people.”

Nationwide, at least 10 million properties could be at “major” and “extreme” wildfire riskbased on First Street Organization.

How to reduce insurance premiums in high-risk areas

Howard from PolicyGenius says existing homeowners can ask their insurance provider for a discount to take steps to mitigate possible damage from climate events, such as storm protection for your house.

You can also save money by shopping around and combining home and auto policies. Homeowners insurance is no longer a “set it and forget it” style, he said.

And if you have enough emergency savings, you might consider lowering your premiums by increasing your deductible, Howard says.

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