As climate change-related disasters become more frequent in the US, homeowners across the country are paying the price through skyrocketing insurance costs — and not just in states like Florida and California, which have been blamed for global warming. Considered the most sensitive.
los angeles wildfireThat has destroyed neighborhoods like Pacific Palisades and Altadena, focusing attention on the growing insurance crisis that is especially acute in states at greatest risk of wildfires, such as California, Colorado, Texas and Oregon. But according to an analysis of insurance data, the problem is reaching nearly every region of the US, including the Midwest, Northeast and mountain states.
Research shows that climate change is exacerbating the conditions that lead to fire-friendly weather, including drying of vegetation and disruption of water supplies. Such conditions are in turn extending the wildfire season as well as increasing the intensity and size of fires.
“serious pocketbook issue”
The average homeowner insurance premium increased 33% from 2020 to 2023, from $1,902 per year to $2,530 by 2024. Research From economists at the Wharton School of the University of Pennsylvania and the University of Wisconsin. By comparison, inflation rose about 18% during the same time period.
Such costs are even greater in parts of the US that are prone to natural disasters, which experts link to climate change. Homeowners in these states saw their insurance premiums increase by nearly 50% over that three-year period, according to Benjamin Keyes, professor of real estate and finance at Wharton and co-author of the 2024 study.
Yet even property owners in states considered less vulnerable to climate disasters are now grappling with increased insurance costs and dropped policies — issues that threaten to weaken property values.
“We've seen this for five years in a row – rising insurance costs – and they're related to the increasing severity of climate events,” says Jeremy Porter, head of climate impact research at the nonprofit research firm First Street. CBS MoneyWatch reported that it models climate risks. “One thing that's amazing is that Kansas and Nebraska and these places in the middle of the country are also seeing such huge increases in insurance.”
While the average US homeowner insurance cost for Nebraskans is now about $2,300 per year Salary An average of $5,700, while Oklahomans are spending about $4,800 annually — not far from Florida's average annual rate of $5,500, Bankrate data shows.
Researchers have found that insurers are increasing premiums to recoup their payouts in response to the increasing frequency and intensity of wildfires, hurricanes and floods. In 2000, homeowner's insurance costs were about 7.5% of a typical mortgage; According to research from First Street, that figure was expected to rise to 22% by 2023.
“This is a serious pocketbook issue,” Wharton Keyes said in a Jan. 10 webcast to discuss the Los Angeles wildfires and insurance policy premium increases. “It's the kind of thing that gets you around the kitchen table and saying, do we need to move?”
Dropped policies from coast to coast
In some cases, homeowners are facing not only higher insurance costs but also difficulties securing coverage.
Non-renewal rates have risen sharply in California and Florida, where so-called insurers of last resort — states' Fair Access to Insurance Requirements, or FAIR, plans — have seen a surge in enrollment. There were thousands of homeowners in Los Angeles Dropped by their insurers Last year, just a few months before the wildfires occurred.
“It's a fire hazard. It's a fire hazard, you know? We were in an area where they can't offer insurance anymore,” said Jeff Cohen, whose Altadena, Calif., home burned in this month's fire. , told CBS News about being dropped by her insurer before the disaster. He and his wife eventually got more expensive coverage through the state's FAIR plan.
But it's not just homeowners in states like California, Florida and Louisiana who are being left out by their insurers, according to a Senate Budget Committee report. published Last month. While most of the top 10 states for non-renewals by insurers were either coastal states or prone to wildfires, the report found that Oklahoma also ranked high, likely due to “surging winds and severe hailstorms from severe storms.” Because of.
The analysis found that the next 15 states with home coverage non-renewable rates included Midwestern states like Nebraska and Ohio, as well as mountain states including South Dakota and Montana. While the non-renewal rate in Florida more than tripled between 2018 and 203, Oklahoma is not far behind, with the rate of dropped policies nearly doubling during that time, the data shows.
“With a more unstable atmosphere, the climate has more latent energy, and we end up with more intense storms that produce heavier rainfall,” First Street's Porter said. “They're linked to climate change, and the fact that the air temperature is warmer and the ocean is warmer affects the winds in a way that is more unstable.”
Heavy rain causes damage in Vermont flood in July 2024, as well as Hurricane Helen Destruction Porter said the past year in parts of North Carolina has been an example of these more damaging weather events.
“In particular, the data make clear that insurance non-renewal is not only a problem for communities typically seen on the front lines of climate change,” the Senate report said. “Florida, California and Louisiana have been viewed as the canary in the coal mine.”
The researchers further said, “[P]Southern New England, parts of Montana, New Mexico, coastal and inland North Carolina and South Carolina are not far behind.”
Are property values at risk?
Most Americans who own a home also have property insurance because mortgage lenders require such coverage to protect their investment against loss caused by theft or accidents such as storms or falling trees. Make policies mandatory.
But as climate-related disasters increase, insurers are readjusting their risk models and raising premiums to meet the need for increased capital reserves as well as buy more reinsurance – basically, Insurance provided by other carriers to insurers, According To the Brookings Institution.
The Senate report predicts that as wildfires, hurricanes and other weather events become more intense due to human-caused climate change, it is likely that insurance access and affordability will also worsen. In some extreme instances, if those areas become uninsurable, property values may decline, which is already a problem. attack certain communities Vulnerable to forest fires and other seasonal disasters.
American homeowners burdened with high insurance costs are unlikely to get any relief any time soon, according to experts.
“We are in the midst of a correction in insurance pricing – they will continue until insurance companies become profitable,” Porter said. “Really no matter where you are across the country, there are some climate threats you're facing.”