As climate change-related disasters become more frequent in the United States, homeowners across the country are paying the price as insurance costs soar — and not just in states like Florida and California, considered the most vulnerable to global change. Warm-affected states.
this Los Angeles wildfiresThe fires, which have devastated communities including Pacific Palisades and Altadena, have focused attention on the growing insurance crisis in California, Colorado, Texas and Oregon. This is especially true in states where wildfire risk is greatest. But the problem has spread to nearly every region of the United States, including the Midwest, Northeast and mountain states, according to an analysis of insurance data.
Research shows climate change is exacerbating conditions that lead to fire weather, including drying vegetation and water supply constraints. This situation, in turn, extends the wildfire season and increases the size and intensity of fires.
Average homeowners insurance premiums rose 33% from 2020 to 2023, from $1,902 to $2,530 per year, according to a 2024 study by economists from the Wharton School of the University of Pennsylvania and the University of Wisconsin. In comparison, inflation rose by about 18% during the same period.
Such costs have risen even sharply in parts of the country prone to natural disasters that experts say are linked to climate change. Insurance premiums for homeowners in those states soared by about 50% during that three-year period, said Benjamin Keys, a Wharton professor of real estate and finance and co-author of the 2024 study.
Yet even homeowners in states considered less vulnerable to climate disasters are now facing increased insurance costs and policy cancellations that can hurt property values.
"We've now seen increases in insurance costs for five years in a row, and they're associated with increases in the severity of climate events," said Jeremy Porter, director of climate impact research at First Street, a nonprofit research firm in Columbia. Broadcaster MoneyWatch said the model could simulate climate risks. “One thing that’s surprising is that Kansas, Nebraska and those places in the middle of the country are seeing big increases in insurance as well.”
While the current average cost of homeowners insurance in the United States is about $2,300 per year, Nebraskans pay Bankrate data shows that the average annual cost is $5,700, while Oklahomans spend about $4,800 per year, not far from Florida's average annual cost of $5,500.
Insurers are raising premiums to recoup claims costs in response to increasingly frequent and severe wildfires, hurricanes and floods, researchers found. In 2000, homeowners insurance cost about 7.5% of a typical mortgage; by 2023, that number had soared to 22%, according to First Street research.
“This is a serious economic problem,” Wharton’s Case said during a Jan. 10 webcast discussing the Los Angeles wildfires and rising insurance and policy premiums. "It's the kind of thing that makes you sit around the dinner table and ask, do we need to move?"
In some cases, homeowners not only face higher insurance costs but even have trouble obtaining coverage.
Nonrenewal rates have jumped sharply in California and Florida, where the so-called insurer of last resort, the state's Fair Access to Insurance Requirements (FAIR) program, has seen significant increases in the number of people insured. Thousands of homeowners in Los Angeles Abandoned by insurance company Last year, just months before wildfires struck.
"It's a fire hazard. It's a fire hazard, you know? We're in an area where they can't insure it anymore," Jeff Cohen, whose home in Altadena, Calif., was sold out this month, told CBS News Burnt in fire. About being dropped by an insurance company before a disaster occurs. He and his wife eventually found more expensive coverage through the state's Fair Plan.
But it’s not just homeowners in states like California, Florida and Louisiana who are being abandoned by insurance companies, according to a Senate Budget Committee report released last month. The report found that while most of the top 10 states where insurance companies were not renewing their policies were coastal or wildfire-prone states, Oklahoma also ranked highly, likely due to “winds and strong convective storms that Increased hail."
The next 15 states with the highest rates of home insurance non-renewals include Midwestern states like Nebraska and Ohio, as well as mountain states like South Dakota and Montana, the analysis found. Florida's nonrenewal rate more than tripled between 2018 and 2030, and Oklahoma is not far behind, with policy cancellation rates nearly doubling during that period, the data shows.
“As the atmosphere becomes more unstable and there is more potential energy in the climate, you end up with more intense thunderstorms that produce heavy precipitation,” First Street’s Porter noted. “They are linked to climate change, in fact. , the temperatures are rising, the oceans are warming, and the winds are being affected more erratically.”
Torrential rains cause damage in Vermont flood July 2024, and Hurricane Helen destroy Porter pointed to last year's weather events in parts of North Carolina as examples of these more damaging weather events.
"Notably, the data clearly show that insurance non-renewal is not just a problem for communities often viewed as on the front lines of climate change," the Senate report said. "Florida, California and Louisiana are viewed as coal mines." The canary.”
"Regions such as southern New England, parts of Montana, New Mexico, coastal and inland North Carolina, and South Carolina are not far behind," the researchers added.
Most Americans who own homes in the United States also have property insurance because such coverage is required by mortgage lenders who require policies to insure their investment against theft or damage from accidents such as storms or falling trees.
But as climate-related catastrophes surge, insurers are recalibrating their risk models and raising premiums to meet the need to build up capital reserves and buy more reinsurance — essentially other insurance, according to the Brookings Institution Insurance provided by a company to an insurance company.
The Senate report predicts that insurance access and affordability may worsen as wildfires, hurricanes and other weather events become more severe due to human-caused climate change. In some extreme cases, property values could plummet if these areas become uninsurable, a problem that already exists attacked some communities Vulnerable to wildfires and other weather hazards.
Experts say U.S. homeowners burdened by heavy insurance costs are unlikely to see any relief anytime soon.
"We're in the midst of an insurance price correction that will continue until insurance companies can make a profit," Porter said. "Realistically, no matter where you are in the country, you're going to be exposed to some climate hazards."