Claire Smith Last Updated On: June 27, 2023

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How Climate Change Has Impacted Your Insurance Rates?

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Deny climate change as you may, the fact remains global temperature is rising, and with it, your insurance rates.

The reason for this is simple: Insurance premiums are based on risk level. So when the US encounters more frequent and severe natural disasters, like wildfires, flooding, hurricanes, or tornadoes, this results in property damage to homeowners and losses to insurance companies. None of this expenditure is sustainable, so, unfortunately, it is driving up home insurance premiums.

Exactly how has the climate changed impacted your insurance rates?

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Extreme Weather

As the global temperature rises, we’re seeing more frequent and record-breaking natural disasters year after year in the US. The issue being, if you encounter an extreme weather phenomenon in a ‘hotspot’ like a tornado in Tornado Alley, due to increasing home insurance claims, providers can’t afford to share the cost with homeowners. The volume of claims due to climate change has skyrocketed. Things are eroding so rapidly that if you live in a ‘hotspot,’ insurance companies may not even offer home insurance or they may offer grossly elevated premiums or add numerous stipulations. These are the extreme weather events and the States or regions they affect:
  • Wildfires: Wildfires are becoming the new normal for the Southwest as the higher and dryer temperatures are creating wide-scale uncontrollable fires. California, in particular, is experiencing worsening forest fires that have led insurers to drop customers in the hotspot known as the “wildland urban interface” area.
  • Flooding: According to FEMA (Federal Emergency Management Agency), 90% of US natural disasters are due to flooding. Flooding doesn’t just impact coastal populations but also moderate-risk flood areas as well.The areas most affected by flooding are the Southwest, Southeast, and Midwest. Insurance providers may offer hefty coverage for vulnerable regions, no coverage to ‘hotspots’, or require special flooding insurance.
  • Tornadoes And Hurricanes: The US has the highest instance of tornadoes annually globally, coalescing in what’s known as Tornado Alley — which encompasses the Central States.Warmer air and ocean temperatures have led to more Category F4-F5 hurricanes hitting the coastal areas along the Gulf of Mexico and the Atlantic. In places like Florida, which have the highest instances of hurricanes, you’ll require hurricane deductibles and windstorm riders to protect your home.

How Climate Change Has Affected Your Rates?

It’s a fact; insurance companies are losing money. There is no way they can keep up with the spike in climate change-related claims without raising national rates, which means those living in low-risk areas will also see a bump in their premiums.

Given the volume of extreme weather claims, insurers have had to make some tough choices; these are some of the ways they’ve had to adapt to the worsening climatic events:

  • By not offering policies to zip codes that are most vulnerable to natural disasters because no amount of retrofitting will protect your home from damage.
    • However, there are State-funded insurance plans, like the California Fair Access to Insurance Requirements (FAIR), that offer expensive coverage, but coverage nonetheless, should you find yourself without a policy.
  • Increasing national premiums, not just to those living in vulnerable regions.
  • Loosening home insurance coverage. This means removing things like flooding protection, so if you want this coverage, you’ll have to add it as a deductible or rider. This puts the onus on the consumer to read the fine print and add the necessary coverage to protect your home.
  • Offering retrofitting or rebuilding benefits to homeowners eligible (check with your provider) and willing to secure their home from associated climate risks.

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Protecting Your Home From Climate Change

If your family is tied to your community — high-risk area or not — and moving out of state isn’t an option, there are still ways you can retrofit your house against known climate risks. The more you outfit your home to combat the forces of nature, the better your premiums. This could mean adding fire barriers, storm shutters, or storm cellars; if this is of interest to you, call your insurance provider and ask for details.

While you’re speaking with your provider, be sure to ask about any deductibles or riders (like a windstorm rider) that will further protect your property. 

Climate Change And How Its Impacted Home Insurance Rates

Whether you live in a wildfire region or a State not known for natural disasters, because of the volume and severity resulting from rising temperatures (air and water) and its effect on the environment, insuring homes has become problematic for insurance providers. It’s hard to forecast Mother Nature and harder yet to assign home insurance premiums.

For insurance companies, climate change is a very real thing. It’s become a necessary evil for insurers to raise premiums to offset the surge in claims linked to extreme weather events so they can continue offering premiums that protect your property from damage.

Claire Smith Claire is a creative entrepreneur with a variety of marketing and content creation skills, including blog and web copy writing, research, and strategy. She has a Masters in Cultural Studies from Queen's University and is known for thinking laterally about marketing, based on her deep knowledge of people and behavior.

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