2020 has brought one natural disaster after another, testing the American resolve with everything from a global pandemic to hurricanes, wildfires and tornadoes. Nothing better demonstrates the consequences of climate change, and experts predict that it will only grow worse.
Loss of glaciers and melting ice caps mean more intense heat waves and elevated sea levels, according to NASA. Over the course of the next century, experts from the Intergovernmental Panel on Climate Change (IPCC) predict that temperatures will rise anywhere from 2.5 to 10 degrees Fahrenheit.
Scott W. Johnson is a home insurance expert for Marindependent Insurance Services, LLC, out of California, a state currently being ravaged by wildfires. He explains, “Floods, brush fires, even landslides can be attributed to warmer, dryer temperatures that are in part caused by global warming.”
The dramatic weather patterns we have seen in 2020 are just a taste of what’s to come with climate change, and the way we protect our homes is also changing in response.
“Home insurance rates are changing because the climate is,” says Ethan Taub, CEO of Loanry. “We have seen a lot of the weather changes cause destruction to communities. As such, a lot of home insurance policies are increasing in some areas to make up for these big events that could happen.”
Andrew Roderick, CEO of Credit Repair Companies, agrees, adding that it is now impacting the kind of coverage you can get, too. “Climate change is causing insurance companies to charge higher premiums on home insurance and making the number of coverage options much lower,” he says.
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“The more storms that homes have to withstand, the higher climate-related home insurance premiums will rise,” says Melanie Musson, a home insurance expert with USInsuranceAgents.com. “In order for insurance companies to stay in business, they need to take in more money in premiums than they pay out to claims. So, the more they pay out in claims, the more they will charge for premiums.”
2020 has made both insurers and policyholders alike take a collective look at the insurance coverage currently available. Standard coverage is no longer cutting it, and homeowners are having to consider additional forms of extended coverage to protect their families.
Than Merrill is the Founder and CEO of real estate education company, FortuneBuilders. “With the increasing frequency and severity of these types of events, home insurance rates have risen proportionally,” he says. “Homeowners who live in ‘high-risk areas’ can expect to see a more dramatic increase in their insurance rates than those who live outside of these areas.”
Where Climate Change Is at Its Worst in the U.S.
Scientists from NASA’s climate change project predict that as climate change worsens, these issues will begin to surface and occur with far greater frequency:
- Higher temperatures
- Frost-free season will become more prolonged, affecting the growing season
- Greater winter and spring precipitation in the North, with less in the Southwest
- More frequent droughts and heatwaves
- Stronger and more frequent hurricanes with greater rainfall
- Sea level increases of up to 8ft by 2100
Of course, certain areas will be affected more than others with some regions of the U.S. considered high-risk areas.
“High-risk means any area that is historically prone to wildfires, earthquakes, tornadoes, hurricanes, et cetera,” says Merrill.
This is how climate change is already affecting regions of the U.S., with conditions to steadily increase and worsen as time continues.
U.S. Regional Effects of Climate Change From the U.S. Global Change Research Program
|Region||Most Common Issues|
|Northeast||Rise in sea levelHeatwavesHeavy downpoursCompromised agriculture, fisheries and ecosystems|
|Northwest||Rise in sea levelReduced water suppliesErosionIncreased ocean acidityIncreased wildfiresInsect outbreaksIncreased tree diseases|
|Southeast||Rise in sea levelExtreme heatDecreased water availability|
|Midwest||Extreme heatHeavy downpoursFloodingPoor air and water qualityAdditional risks to the Great Lakes|
|Southwest||Increased wildfiresDroughtFlooding and erosion in coastal areasHeatwavesHeavy downpours|
Natural erosion and climate change are also affecting the terrain of many communities, explains Johnson. “Homes that used to be in low-risk flood zones are now high risk. Properties that used to cost little to insure are now seeing non-renewals. New rates with a new insurer at sometimes ten times the old rate.”
“If claims history in a certain region demonstrates a greater risk for weather-related claims compared to other regions, policies within that region will cost more,” says Musson simply.
How Climate Change Has Impacted Home Insurance Rates
It can be harder to find home insurance coverage when you live in a high-risk area, and when you do, it can cost a lot more than other, less dangerous regions.
“Climate change has even made it difficult for insurers to figure out what sort of risks certain areas face and how to price policies appropriately,” explains Hamill. “From an entire industry perspective, insurers may pull out of certain regions or become insolvent when trying to pay claims, ultimately making coverage either unaffordable or unavailable for people who need it.”
Virginia Hamill, Senior Insurance Analyst for FitSmallBusiness and former wholesale expert at Insureon, breaks it down further. “Let’s start with the fact that insurance premiums are at least partially based on your risk,” she says. “If you live in a disaster-prone area, then your home insurance rates are already higher than the national average. When you factor in the increased risk that climate change brings, then it stands to reason that your costs could go up.”
It has presented a predicament where pricing is concerned.
Johnson speaks frankly about the issue affecting many of his clients. “Listen, no one wants to tell an elderly grandmother that climate change is here, and its bill is now due in the form of their home insurance premium, but it’s pretty much true,” he says. “I cannot tell you how many retired people that I have spoken to that have had their policy non-renewed. I have to be the one to tell them a new premium is five, six and even ten times more expensive.”
Will Things Get Worse?
There is no doubt that Earth is on a serious collision course with Mother Nature if humans do not change their harmful ways.
“Climate change is getting worse every year, as we are not doing much to stop damages,” says Roderick. “Because of this, insurance rates will continue to rise.”
In its report, IPCC’s global network of climate change scientists wrote, “Taken as a whole, the range of published evidence indicates that the net damage costs of climate change are likely to be significant and to increase over time.”
NASA goes further to say, “The magnitude of climate change beyond the next few decades depends primarily on the amount of heat-trapping gases emitted globally, and how sensitive the Earth’s climate is to those emissions.”
How to protect your home from a changing climate
Musson warns that moving isn’t always the answer. “Home insurance rates vary greatly across the country, so moving to another state or area could greatly reduce your insurance rates if you’re moving to an area with lower weather-related risks,” she explains. “The opposite is true as well, though. If you move to a higher-risk area, your rates will probably increase.”
It’s not just these regions that will remain affected by price hikes. Musson expects that it will trickle down to customers everywhere. “When claims are being made more often across the country regardless of region, everyone will face higher premiums,” she says.
The changing climate has also changed how insurance companies are approaching the average homeowners insurance policy, creating new kinds of coverages that help protect your home from extreme weather.
“Insurance carriers have a keen interest in mitigating the risk climate change presents,” says Hammill. “For that reason, many offer property coverage that allows homeowners to upgrade to ‘green standards’ after a loss. Others cover the cost of buying electricity from another source after an outage if a homeowner uses wind or solar power. Most are also more likely to insure homes with features that protect it, such as fire or hail-resistant roofs or hurricane shutters.”
Even if you are happy with your insurance provider, these new types of homeowners insurance policies deserve a close look as 2020 continues to deliver its barrage of extreme weather.
“It is absolutely critical that you review your policy and find out which natural disasters are covered and which are not,” advises Merrill. “For example, the average home insurance policy does not include earthquake coverage, which is often available for an additional price.”
A newer policy with a better insurance provider could give you everything you need, but Taub also emphasizes the value of maintaining and caring for your home.
“You can lower your rates if you do everything you can to keep your house secure,” he says, adding that you should promptly address damages and ensure a continued strong foundation for your home. “You can even ask the insurance company about this, and use the list they give you to be able to make those changes lower your rates.”
If your rates are increasing, it can be worth taking time to compare quotes from different companies and shop around for cheaper homeowners insurance.
The Bottom Line
With climate change poised to bring increased extreme weather patterns, insurance providers are reevaluating the way that they protect your home, with policy price increases that serve to reflect the losses being sustained from modern climate issues.
Merrill explains, “The best advice I can give when it comes to climate change and home insurance is to plan well ahead. Do not wait until the floodwaters are rising to pick up the phone and call. If you live in a high-risk area, protect yourself well ahead of time.”
You’ll be glad you did.
Featured image by Emily Kask / AFP / Getty Images.