Above, Minnesota yesterday. “In my 35 years here I’ve never seen the water this high.” Local residents show up to help each other weather the flood, but no one can make another whole who has lost their home.
Across the Heartland, more and more Americans can’t afford Home Insurance, in large part due to increasing impacts of climate-amplified weather extremes.
If you thought you were just going to leave your children to deal with climate change, well, first, shame on you – but also, joke’s on you too – because it’s hitting us now, more and more in the wallet, and not just on the coasts.
A recent study from the Insurance Information Institute found 12% of Americans no longer have home insurance, up from 5% in 2019.
It’s the highest level of uninsured homeowners the industry-funded research group has seen, and follows a dramatic spike in the cost of coverage.
Mortgage lenders typically require proof of homeowners insurance – which coversselect damages to the house, its contents and other structures on a property. Homeowners who fail to secure coverage can find their lender charging them for “force-placed insurance,” which can be twice as expensive as other insurance policies and protects the lender rather than the homeowner.
But for the roughly 40% of Americans who own their home outright, homeowners insurance may be viewed as a discretionary purchase ‒ even if industry experts say forgoing insurance often isn’t worth the risk.
Insurance companies sought to raise homeowners’ premiums by more than 11% last year, according to S&P Global Market Intelligence.
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Analysts say insurance companies are trying to keep up with years of big losses as inflation and supply chain disruptions pushed up the costs to fix damaged homes. The Insurance Information Institute reports that insurers paid on average $1.10 for every $1 in premium they collected last year.
Then there’s climate change, which is intensifying extreme weather. The National Oceanic and Atmospheric Administration reported 28 billion-dollar disaster events last year, a new record in the inflation-adjusted data going back to 1980.
“You have all these factors combining to result in people paying a lot more for the same amount of coverage,” said Zawacki of S&P Global Market Intelligence.
He expects another double-digit rate of growth this year.
Former Federal Emergency Management Agency administrator Craig Fugate said for some mortgage-free homeowners, dropping insurance may not be a bad decision if they have large enough cash reserves. But people tend to underestimate their exposure and the cost to repair.
“It’s a risky decision,” he said.
The higher premiums are putting a strain on households already struggling to afford price increases on life’s staples, from groceries to health care to automobiles, particularly lower-income households that have depleted pandemic-era savings and are running up credit card debit and falling behind on payments.
At the greatest risk are low-income homeowners and homeowners of color who disproportionately go without homeowners insurance, research shows.
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(Sharon) Cornelissen of the Consumer Federation of America said this is a nationwide crisis in the making. Higher-risk areas may face higher costs first, but the rest of the country won’t be far behind.
Yes, coastal disasters hurricanes and wildfires are affecting a growing number of people on the coasts. The U.S. Fire Administration estimates that more than 46 million homes valued at $1.3 trillion are at risk for wildfires, and the top 10 growth states in the 2020 U.S. Census were all hurricane-prone. Some insurance providers are even beginning to pull out of states like California and Florida.
But landlocked states are getting hit harder too, with thunderstorms resulting in an estimated $64 billion worth of economic losses last year – nearly double the losses in 2022, according to reinsurer Munich Reinsurance America.
“This is not an issue restricted to coastal states such as California and Florida,” Cornelissen said.