Does Climate Change Affect Your Homeowners Insurance?
Absolutely, yes. Climate change will affect your homeowner insurance over the upcoming years in a myriad of ways.
Whether these changes manifest as increasing premiums, reduced coverages, new exclusions, non-renewals, or a combination of all these points, property owners in the US can expect to see significant changes to their home policies.
In this article, the Einsurance team dives deep into the relationship between climate and the insurance market. We’ll explain all those points and more.
As licensed insurance professionals, it is our duty to provide accurate, unbiased, and thoughtful information to consumers.
Keep reading to learn:
Let’s get started.
About Climate Change and Homeowner’s Insurance
Ten years ago, shopping for homeowner insurance was relatively simple. Whether buying a new home or shopping for better rates, one could pick up the phone, visit some agents in person, or get home insurance quotes online. Within a few days one could have several quotes to compare.
You can still get home insurance quotes through these methods, but things are much more complicated in 2024.
In November 2023, CNN reported that “insurers — especially those in areas most impacted by floods and fires — are raising their premiums, or pulling out altogether, impacting the affordability and availability of home and fire insurance.”
Major Insurers Have Left Some States Already
Citing issues like climate change and increasing risks of wildfire, many insurance companies have left certain states, or drastically reduced their offerings.
The California Insurance Market is Volatile
As the most populous state in the union, California is home to almost 40 million souls and estimated 55% of them are homeowners. And as of mid-2024, the following insurers are not writing any new business the state:
State FarmUSAANationwideAllstateThe HartfordChubbKemper Independent InsuranceUnitrin and Unitrin Direct Property Insurance
Many others, like Farmers Insurance, are limiting their new business to a very small number of policies.
For many CA homeowners, this leaves the California Fair Plan (CFP or “Fair Plan”) as the only choice for property insurance.
Now, Fair Plan is enough to appease a mortgagee, as it provides fire coverage. But these policies are expensive, and they don’t provide some coverages included in a traditional homeowner policy, like theft or liability.
That means Californians are paying more for less coverage and must buy stand-alone liability policies from other carriers.
In short, it’s a mess.
In response, California Insurance Commissioner Richard Lara announced his Sustainable Insurance Strategy to combat the effects of climate change on homeowner’s insurance availability and pricing, in September 2023.
Will it work?
As licensed agents in this market, we’re not convinced.
Anecdotally, it seems even more home policies have been non-renewed in the state since that time; for more outlandish reasons, but no reports have been published yet to prove statistics.
Another state suffering challenges in the insurance market is Florida.
The Florida Insurance Market is in Disarray
The average Floridian homeowner pays $6,000 annually for homeowner’s insurance, if they can get it. According to Governing.com, there are three factors at play in the Sunshine State:
Natural disasters are becoming more frequent (thanks to climate change), and building supplies are more expensive post-pandemic.The cost of reinsurance is increasing (insurers sometimes insure the risks they write through other companies.)The state’s litigation-friendly environment invites expensive liability lawsuits.
That’s why, in 2022, Florida lawmakers created Senate Bill 2A (2022A). The Florida Optional Reinsurance Assistance program (FORA) authorizes some insurers to buy reinsurance coverage through FORA (that is, the state), providing they may be subject to examination by the state after hurricanes and such.
In short, the point is that insurers cannot abuse claims appraisals processes after catastrophes.
Will it work?
Again, we’re not wholly convinced.
We know that climate change is leading to higher sea levels, more risks for hurricanes, floods and tidal waves, and Florida endures them all.
And Florida lawmakers seem to agree. That’s why they’re offering more tax incentives and exploring more legislation to protect consumers.
Now, you’re likely thinking, “What if I don’t live in those states? Will climate change still affect my homeowner’s insurance?” And this leads nicely into our next section, examining the relationship between climate change and property insurance.
How Climate Change Affects Homeowner’s Insurance
First, let’s address the elephant in the room. Is climate change “real?”
Is Climate Change “Real?”
On homeowners insurance and climate change, reality almost doesn’t matter. We know this is a controversial statement but stick with us for some unbiased information.
Whether changing temperatures are actually caused by human behavior, as put forth by NASA, or part of the regular cyclical changes endured by our planet, or even a figment of our imagination… insurance agents don’t know. But it doesn’t matter.
Here’s Why
As insurance professionals — not climate scientists — we can statistically prove that insurers are acting as if climate change is real (and we’ll talk more about that shortly.)
We can also prove that most world and even state governments acknowledge it. We all know that American consumers are trying to cope with the changes in the industry.
And at the end of the day, it’s the consumer who must find new insurers in failing markets and pay higher premiums when insurers and governments change the rules.
In sum, we’re not experts on climate change. But we know this: insurance change is real!
So, how do insurance companies use climate change to alter their contracts or change the game? Let’s take a look ahead.
Insurers Attribute Increasing Fire Risks to Climate Change
First, remember that traditional homeowner’s insurance companies exist to make profits. They are not charities or government-run agencies (yet.) It makes practical business sense that an organization which insures consumers against fire risks, would refrain from doing business in high fire risk areas.
Just as an auto insurance company would refuse to insure a youngster with an expensive car and a dismal driving record, insurers can refuse to insure consumers. And they can choose to non-renew the policy of a long-term client, based on perceived risks associated with climate change.
On Tornadoes, Climate Change and Homeowner’s Insurance
As of 2024, we’ve seen the most significant changes in the California and Florida insurance markets. But there may be further changes in middle-America soon. That’s because the area known as “Tornado Alley” seems to be shifting, and dangerous tornado activity seems to be increasing.
And in the future, we may see more issues in coastal states.
Hurricanes, Tropical Storms and Climate Change
States like Louisiana, Virginia and Georgia aren’t exempt from changes in the property insurance market. If tropical storm and hurricane activity increases, and insurers can attribute it to climate change, consumers in those states might be facing an unsteady market in the future, too.
Now, let’s explore some ways consumers can lower home insurance premiums, and how we can all prepare for climate change risks.
How to Lower Your Home Insurance Premiums
Here, we’ll look at ways you can keep your home insurance costs low. From shopping around to increasing your deductible, we’ll cover everything you need to know.
Shop Around for Home Insurance Every Few Years
Thanks to inflation and a host of other issues, it feels like everything is getting more expensive. But even when the economy is ideal, insurers will raise their rates a little bit every year, even for excellent customers who have zero claims and a perfect payment history. You’re not imagining it!
If you’re coping with creeping premium prices, the best thing to do is shop around. (You could try our handy online tool to get dozens of quotes quickly, by the way.)
Just be sure to compare “apples to apples” when comparing quotes.
Be sure to check:
That the policy limit is high enough to rebuild a home completely after a total lossThat you have endorsements you prefer, like Replacement Cost coverage for your belongingsThe limit of liability coverage on the quote
And, if you’re buying a new contract, double-check:
Your mortgagee information, if neededThe correct spelling of the primary named insuredThe home address and mailing addressContact phone numbers and emails
If you’re generally happy with your homeowner’s insurance company, and want to stay with them, there are still ways you can lower your premium payments.
Lower Your Limit on Liability
Many homeowner insurance policies provide liability insurance, and it’s a very costly line item on your policy.
It’s designed to protect you in cases of:
Injuries to visitors that occur on your propertyDamages you might cause to other people’s propertySome other types of lawsuits
Depending on your policy, you may be paying for as little as $50,000 or $100,000 in coverage. On the high end of, you might buy $300,000, $500,000, or even $1 million in liability coverage.
Ask yourself: How much liability coverage do you really need?
In more litigious states like Florida, it’s probably wise to keep as much liability coverage as you can afford. But, if you’re in a tight financial position, it makes sense to lower your liability from, say, $500,000 to $250,000, or $300,000 to $150,000. You might save hundreds of dollars every year.
And, since you’re working to massage these premiums down, you should check your deductible costs, too.
Consider a Higher Deductible, if Appropriate
First things first; a higher deductible might not be appropriate if you pay a mortgage. Most financial institutions will require that you maintain a specific deductible, like $1,000 or $2,500, on your policy. This is how the bank makes sure they’ll be made whole after a total loss on a home.
However, if you own your home outright, keep a few grand in the bank at all times, and your deductible is currently less than $1,000, you might be able to save a lot of money by raising that deductible. Just read your policy and contact your insurer to run those numbers.
Consider “Bundling” Insurance Products
Some insurance companies will give you a better price if you buy multiple lines of insurance from them. Additionally, some consumers like having a “one stop shop” for their insurance needs.
Just remember that it can be frustrating to leave an insurer if you have all your policies with one company; and look into life insurance cash values before cancelling a whole life policy to move it elsewhere.
Now that we’ve covered ways you can keep your insurance prices lower in the face of climate change, let’s talk about other ways you can prepare for it.
How to Prepare for Climate Change
Climate change does affect your homeowner’s insurance in many ways, and it will continue to do so for several years.
One can spend a lot of time researching the internet for ways to prepare for climate change. If you’re wondering how to get ahead of the curve, we’ve put together some helpful advice.
Create a Defensible Space Around Your Home
If home fires, arson and brush fires seem to be increasing in your area, it’s time to create a defensible space around your home’s perimeter.
That means:
Dead or dry trees or bushes are removedFirewood isn’t stacked near the homeTree limbs aren’t touching the roof or exteriorGrasses are cut shortTrash is stored in bin
Insurance companies love to see a defensible space, by the way.
Prepare Yourself Financially for Climate Change Risks
Finally, try to build your savings to have cash on hand as needed. You can do this in a few ways, and finding cheaper home insurance is one of them. This way, if climate change does affect your area, you have the means to find safe solutions, whatever they may be.
We hope you enjoyed reading our dissertation on how climate change affects insurance, we enjoyed writing it! As always, we invite you to read our Insurance Journal for more helpful topics for consumers and try our simple quoting tool today to see how much money you could save on insurance.
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