Frequent weather catastrophes, exacerbated by climate change, are increasingly affecting homeowners and potential buyers. In response, some insurers have ceased writing new policies in states like Florida, threatened by Hurricane Idalia, and California, or have reduced coverage and increased rates.
This trend is expected to continue nationwide as climate-related weather events become more common and insurers face tighter risk management and reinsurance challenges.
Last year, global insured losses from natural disasters exceeded $130 billion, with Hurricane Ian being a major contributor. This hurricane alone resulted in $50 to $55 billion in insured losses due to severe storm surges, flooding, and wind damage in Florida and Cuba, according to Aon.
Consumers are facing tougher insurance choices, including higher premiums, reduced coverage, and increased deductibles, according to John Dickson of Aon Edge.
Homeowners and Buyers Can Adapt to Increased Costs, Limited Coverage, and Market UncertaintyAs weather-related risks rise, disruptions in the home insurance market are anticipated. Insurers are re-evaluating their risk concentrations in areas prone to disasters like wildfires, floods, and storms, which could lead to more insurers withdrawing from high-risk regions.
State Farm and Allstate have already stopped accepting new home insurance applications in California, and Farmers Insurance recently exited Florida. The average annual homeowners’ insurance premium is currently $2,777, with substantial variation by state. Costs are rising, and many homeowners have seen increases in their premiums.
To manage these challenges, consumers should compare shop among insurers, considering factors like financial stability and claims handling. Online insurance options may offer savings, but thorough comparisons are necessary. Proactive weather-proofing upgrades, such as stronger windows and fire-resistant materials, may help reduce premiums and increase property resilience.
For some, relocating to less risky areas might be a viable option, especially as remote work becomes more feasible. Tools like Risk Factor, from the First Street Foundation, can help consumers assess local environmental risks.
Long-term, regulatory policy changes are needed to address climate risks comprehensively, but homeowners should focus on protecting their properties and engaging with policymakers to advocate for system improvements.