Millions of people across the country are already facing higher rates due to natural disaster risks.
Across the United States, millions of homeowners have been watching their insurance rates climb in recent years due to the spiking risk of high winds, floods and wildfires, said a new analysis.
Around 12 million US properties could see increases to their premiums due to flood risk alone.
Almost 24 million properties will experience higher insurance rates because of the risk of wind damage, and about 4.4 million property owners will need to pay more for their coverage due to high wildfire risk. This, according to the estimates published by climate data nonprofit First Street Foundation.
These higher rates are making it even harder for homeowners to afford their properties, at a time when these expenses are already particularly challenging to meet. According to the report by First Street Foundation, around 640,000 delinquent mortgages could watch their premiums climb, “increasing the likelihood of default.”
Insurance rates are climbing because the cost of coverage to insurers is rising fast due to climate change.
Insurers have been altering the way they work climate and extreme weather into their calculations for the premiums they charge to cover a given property. Others are stepping out of various markets where the risks are highest. Florida and California are prime examples of where these trends are taking place due to flooding, wind and wildfire risk.
When affordable coverage is not available, many consumers find themselves leaning on public insurers of last result, but unfortunately that often leaves them with higher rates. Without any other option, consumers are required to pay those higher amounts.
FEMA also recently updated its own pricing model for its insurance rates for the first time since the 1970s. This has caused many policies to see higher premiums that more closely reflect the current flooding risks.
As climate change leads to more extreme weather, policymakers and insurers are finding themselves scrambling to do what they can to ensure that premiums reflect the actual risk but still remain affordable to policyholders. This is leading to several new legislations, but only time will tell whether they are effective as hoped.