Should You Make Changes to Your Home Insurance Due to Global Warming?

According to the World Meteorological Organization, weather-related disasters have escalated over the past few decades, leaving billions of dollars in damage in their aftermath. As more regular and destructive natural disasters, such as hurricanes, wildfires, and heat waves, alter the global environment, your perspective on insurance may also need to evolve.

When purchasing a home, you are normally obliged to obtain at least basic homeowners insurance coverage to safeguard your property and possessions. Damage from fire, wind, and hail, and theft are typically covered. Floods and earthquakes are not. Residents in these locations must purchase separate insurance plans for floods and earthquakes.

Many homeowners must reevaluate their coverage or obtain new policies and, in some cases, pay extra for the same coverage due to climate change.

Impact of Climate Change on Insurance

With the increase in extreme weather, Americans are already beginning to observe changes in their home insurance:

In some regions, premiums for home and other types of insurance are increasing. This is more troublesome in regions where natural catastrophes have recently occurred or climate change has increased the risk. By 2040, the Swiss Re Institute predicts that worldwide property insurance premiums will increase by 5.3% yearly.

Others are dropped by their insurance providers and find it difficult to obtain new coverage. In recent years, insurers have canceled or failed to renew hundreds of thousands of home insurance policies in California's high-risk fire zones.

Lack of coverage: Homeowners that reside in locations notoriously prone to natural disasters like hurricanes can plan accordingly and purchase flood insurance if they can afford it. But climate change sends catastrophic weather to unexpected locations, like New York City in September 2021, when two tropical storms caused historic flash floods. Thousands of homeowners whose homes and possessions were damaged lacked flood insurance because they believed it useless. While the Federal Emergency Management Agency (FEMA) distributes relief via application in severe circumstances, weather disasters that are not covered by insurance can cause financial devastation to the people affected.

According to 2021 research on climate change by InsuranceQuotes.com, climate change can also affect other forms of insurance.

The need for travel insurance, particularly those that may be canceled for any reason, will undoubtedly increase as climate change intensifies. This is because passengers may need to cancel travels to high-risk locations undergoing a natural disaster or have emergency evacuation coverage.

As a result of the effects of climate change on health, health insurance may become more essential and expensive. For instance, poor air quality due to fires could exacerbate respiratory problems, and heat waves or droughts could affect the elderly or people with preexisting disorders. This may also affect the cost of life insurance.

Review Your Insurance Coverage

Take immediate action if you are confused about what your homeowner's insurance covers or if you are concerned about new weather dangers resulting from climate change. Read your policy and call your insurer if you have any questions regarding the scope of coverage.

Inquire if you are fully covered for extreme weather that may emerge due to climate change and if you should consider expanding coverage. For instance, if your region has experienced an upsurge in high rainfall in recent years, it may be beneficial to purchase flood insurance.

Find and talk with an insurance professional if your present insurer does not help assess future risks. Find someone who can advise you on how climate change may affect the local weather and the appropriate insurance coverage. It may be that no adjustments are necessary at this time, but it is prudent to find out.

Consider Methods to Reduce Risk and Cost

According to the analyst firm McKinsey, insurers would be wise to assist clients in mitigating risk before disasters and avoid filing claims after the fact. The organization provides a case study of an insurer whose homeowners insurance consumers have access to wildfire defense services, such as the relocation of valuables and the dispatch of fire professionals to assist as flames threaten. Enquire with your insurance if they provide emergency prevention services.

In addition, several organizations offer incentives that safeguard homeowners and lessen their financial constraints. In California, certain insurers give insurance premium discounts to customers who "harden" their homes against wildfires. Consider searching for an insurer that offers a discount for installing weatherproofing.