How Climate Change Is Affecting Insurance for Homebuyers

As climate change continues to incite severe weather systems and natural disasters around the world, the U.S. housing market absorbs the effects. Around the country, some of the most appealing places to live — both for their low cost of living and warm weather — also happen to be the cities most prone to conditions such as hurricanes, wildfires, floods, hail, and beyond.

As these natural disasters increase in both regularity and severity, home insurance premiums have skyrocketed. What are homeowners and insurers to do? Ultimately, homeowners hoping to live in high-risk areas of the U.S. have ways to mitigate risks, improve their risk profile, and negotiate better pricing and coverage. Read on to learn more about how climate change is affecting insurance for homebuyers, and what can be done about this critical issue.

In High-Risk Areas, Premiums Are Rising

What defines a high-risk area, and why are premiums rising? Around the U.S., many places that are attractive to homebuyers both for affordability and other factors are also the areas getting hit hardest by the growing effects of climate change. Coastal cities along the American south and southwest (such as in Florida, Texas, North Carolina, South Carolina, and Georgia) are seeing growing populations and economies.

Unfortunately, the rise of extreme weather events in these areas makes it more costly and prohibitive for homebuyers to purchase insurance. Developers continue to rebuild on land that has been battered by hurricanes, snowstorms, and fires, and over the past several decades, insurance companies have had to pay out tens of billions in claims due to natural disasters. As a result, deductibles are rising — and some insurance companies are simply not covering extreme weather-related damages at all due to the cost.

Flooding Is Another Issue Entirely

In much of the U.S., flooding makes issues even more complicated. Home insurance policies don’t include coverage for flood damage, which has homeowners either having to purchase private coverage or through the U.S. government under FEMA. As the frequency and severity of flooding have impacted homes around the U.S., FEMA’s National Flood Insurance Program (NFIP) has been unable to support payouts and has fallen into debt.

Additionally, many homeowners end up purchasing homes in flood-prone areas without realizing it. As climate change has worsened, areas not traditionally expected to flood have seen rising sea levels. Coastlines have begun to erode, making many older homes susceptible to flood damage.

What Homeowners Can Do to Mitigate Risk

There’s much that homeowners can, and should, do to mitigate the risks of a natural disaster causing damage to their property. Firstly, homeowners should always do proper research before buying a home. What type of extreme weather has the area experienced over the past several years? What are the chances that the property is prone to flooding? Homeowners should take advantage of free online tools to help assess climate change-related risks.

Following are several links to resources you can share with your insureds, courtesy of risk-modeling firm RMS.

  • provides past, present, and future risk projections for floods, fire, and heat.
  • Climate Check gives a risk rating for storms, heat, fire, drought, and flood.
  • shows the flood and fire risk for specific addresses.
  • shows flood, storm, drought, heat, and fire risk for specific addresses.
  • Wildfires Risk to Communities displays wildfire risks for communities, tribal areas, counties, and states.
  • FEMA National Risk Index map shows the level of risk for all natural hazards, as well as social vulnerability and community resilience for all counties in the U.S.

Homeowners can also storm and weather-proof their homes so that the damage will be lessened in the event of a natural disaster. This preemptive work can serve as leverage when discussing premiums or coverage with an insurance company, as homeowners can take plenty of steps to modernize their homes and safeguard their property from damage. For example, evidence shows that the devastation from Hurricane Ian in Florida was less severe on homes that followed a newer set of building codes, proving that modernized infrastructure is one part of the solution.

The Long-Term Takeaway

Ultimately, homeowners will have to consider whether rising insurance costs are worth lower costs of living and other factors that draw them to high-risk areas of the U.S. If climate change continues to worsen, insurance costs will rise further. Though there are steps that homeowners can take to lessen their overall risk, they should also think critically about long-term, safe housing in areas that are potentially less prone to severe natural disasters.