Firefighters stop by a burning home during the Kincade fire in Healdsburg, Calif., October 27, 2019.
Josh Edelson | Afp | Getty Images
As climate change threatens the United States with more natural disasters, it’s becoming increasingly expensive for Americans to insure their homes—experts say it’s only expected to get worse. increase.
Jeremy Porter, chief research officer at the First Street Foundation, a nonprofit focused on defining climate risk in the United States, said:
there was indeed $2 billion U.S. natural disaster In 2021, it cost us a total of $145 billion, including extreme freezes, wildfires, floods, tornadoes and other severe weather. National Oceanic and Atmospheric Administration.
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an increase in costly climate events and Rising reconstruction costslabor shortages and a “surge in demand” after natural disasters have pushed homeowners’ insurance premiums higher, experts say.
“We’re seeing a dramatic increase,” said Pat Howard, managing editor at Policygenius and licensed home insurance expert.
Nearly 90% of U.S. homeowners saw their insurance premiums spike between May 2021 and May 2022, costing them an average of $134 a year. Policygenius Report.
Compared to a year ago, the national average increase is 12.1%, but disaster-prone states such as Arkansas, Washington and Colorado are seeing higher surges, the report found. rice field.
Water-damaged items outside a home in Squabble Creek, Kentucky after historic flooding in eastern Kentucky on July 31, 2022.
Seth Herald | Afp | Getty Images
Brad Wright, a certified financial planner and managing partner at Launch Financial Planning in Andover, Massachusetts, said erosion and sea level rise are a growing concern for clients interested in coastal real estate.
For example, if someone is looking to buy a house on the beach in southern Maine, the question always arises about flood risk and property insurance premiums. Depending on the answer, I may choose another house.
Still, the owner may have unknowingly purchased or owned in a flood-prone area. While the Federal Emergency Management Agency identified 8 million facilities at risk of one-degree flooding in 2010, the First Street Foundation found nearly double that amount in a single year. did. 2020 report.
Standard Homeowners Insurance Does Not Cover Flooding, But Protection Is Available through FEMA or private coverage that may be requested by the mortgage lender. The average annual premium is $985, value penguinexperts say costs could be significantly higher in high-risk areas.
last October, FEMA Revamped Program To better assess flood risk, premiums for some coastal facilities have increased from $700 or $800 to $4,000 or $5,000 a year, said Porter of the First Street Foundation.
These price increases could be prohibitively expensive for low-income families and retirees, especially those who may be living on property inherited from family members, Wright said.
“These family homes have been around forever and they may not have a mortgage, so they may not need flood insurance,” he said. should be.”
Burning flames from the McKinney Fires in Klamath National Forest on July 31, 2022.
David McNew | AFP | Getty Images
Wildfires are covered as part of standard homeowners insurance coverage, but insurance premiums in fire-prone areas also increase, according to Michael Barry, chief communications officer at the Insurance Information Institute. It’s getting more expensive.
“Home insurers are looking at pricing to reflect risk,” he said.
For example, California premiums increased by nearly 10% from May 2021 to May 2022. policy geniusin part due to an increase in costly wildfires.
Bill Parrott, an Austin, Texas-based CFP and president and CEO of Parrott Wealth Management, has also seen premiums rise in high-risk areas.
“If you move to a wildfire or flood prone area, that cost will rise dramatically as carriers pass it on to consumers,” he said. “It’s a big expense for a lot of people.”
at least nationally 10 million facilities may be at ‘significant’ or ‘extreme’ wildfire riskaccording to first street foundation.
Regardless of where you live, it’s important to do your homework before buying property, suggests Barry of the Insurance Information Institute.
According to PolicyGenius’ Howard, current homeowners can ask their insurers for discounts to take steps to mitigate climate change damage, such as storm protection for their homes.
You can also shop and save money by bundling home and car insurance. Homeowners insurance is no longer a “set and forget” type, he said.
And if you have enough emergency savings, you might consider increasing the deductible and lowering your premium, Howard said.