“In fair weather prepare for foul.”
Thomas Fuller
Weather-related disasters are on the rise, and are also becoming more and more costly. In 2022, there were 18 events in the US causing over a billion dollars in damage. There have been nine so far this year. Unsurprisingly, this is having repercussions on the insurance industry, which in turn affects all of us. Insuring against weather disasters is a canary in a coal mine for climate change.
Fewer options
State Farm Insurance just announced they will no longer take new property insurance customers in California. Allstate made a similar move last year. These decisions were driven by wildfire risk, along with the rising cost of rebuilding. Similarly, in Florida, Farmers Insurance stopped writing new policies this month. In fact, fifteen insurance companies have left Florida over the past year and a half. Yikes.
California and Florida are two of the hardest states in which to insure homes. Others include Colorado, Louisiana, New York, and Texas. But other states are also facing challenges, as the areas considered high-risk are growing.
Insurance companies operate on the concept of pooled risk. If the risk in a state becomes too high, and insurance companies can’t raise rates enough to cover the cost of rising claims, they may decide to close up shop.
Rising homeowner costs
Not only is it getting harder to find insurance in some places, but costs are ballooning for homeowners. Rates in Florida are anticipated to rise an average of 43% this year. Similarly, in parts of Eastern Kentucky devastated by flooding last year, rates are expected to quadruple. Clearly, this will put a strain on many families.
Ripple effect
Federal aid fills the gap when insurance doesn’t fully cover costs to rebuild, so the burden is landing on taxpayers. More costly weather disasters could have ripple effects not just for the insurance industry, but also for the real estate market and the economy as a whole.
What can we do?
It helps to understand our risk and what our insurance covers. Check out Risk Factor, a free tool where you can find the risk levels for flooding, wildfires, extreme heat, and extreme wind for a specific property. The site also has helpful information about mitigating risk and preparing for potential disasters. When buying a new home or relocating, disaster risk and insurance costs are worth considering.
Solving climate change has so many win-wins, and a big one is protecting our homes in the places we love.
Let’s do something about climate change. Learn about it. Think about it. Talk about it.