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.
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
Brad Wright, a certified financial planner and managing partner of Launch Financial Planning in Andover, Massachusetts, says erosion and sea level rise are increasing concerns for key clients Interested in coastal real estate.
For example, when someone considers buying a home along the southern Maine beaches, there are always questions about flood risk and the cost of property insurance. Depending on the answer, they may choose another house.
However, owners may unwittingly purchase or own in flood-prone areas. While the Federal Emergency Management Agency identified 8 million properties at risk of flooding within 1 year and 100 years, the First Street Foundation found nearly double the amount in one year. Report 2020.
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.”
Flames burn during the McKinney Fire in Klamath National Forest on July 31, 2022.
David Mcnew | AFP | beautiful pictures
According to Michael Barry, communications director at the Insurance Information Institute, although wildfires are covered as part of standard homeowners insurance, premiums in fire-prone areas can also become expensive. redder.
“Home insurers are looking to price policies to reflect risk,” he said.
For example, premiums increased nearly 10% in California from May 2021 to May 2022, according to Policywith an increase in costly wildfires partly to blame.
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.
No matter where you live, it’s important to do your homework before buying a property, suggests Barry of the Insurance Information Institute.
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.