Experts warn of compounding insurance crises setting the stage for a major fallout: 'That is going to spill over into housing markets'

The home insurance market is facing mounting pressures from worsening extreme weather events, leading to larger payouts for damage, people moving to riskier areas, and high inflation making insurance less affordable.

Here's what you need to know to ensure your property stays protected without draining your bank account. 

What's happening?

According to Econofact, weather events with at least $1 billion in damages have increased substantially since about 2008, meaning insurers have had to pay more to help homeowners recover.

In turn, insurance companies have raised premiums to cover losses, making it harder for residents to afford coverage. From 2020 to 2023, the average premium increased by a staggering 33%, according to a working paper published by the National Bureau of Economic Research.

Some major insurers are even reducing coverage or pulling out of states facing high risks from wildfires, floods, and hurricanes, such as Florida, Texas, Louisiana, and California.

While state-sponsored programs, including the Fair Access to Insurance Requirements (FAIR) Plan insurance policies, have helped many homeowners maintain coverage, these policies are meant to be a last resort and often don't provide full coverage.

Further compounding the problems, high inflation rates have made it more expensive for homeowners to rebuild after natural disasters, leading many to consider relocating, per National Mortgage News.

"Insurance is where many people are feeling the economic impacts of climate change first," Carolyn Kousky, associate vice president for economics and policy at the Environmental Defense Fund, told WLRN. "That is going to spill over into housing markets, mortgage markets, and local economies."

Why does the home insurance crisis matter?

As WLRN explained, the increasing frequency and severity of natural disasters caused by our warming planet is leaving insurers with no choice but to raise rates. But it's a vicious cycle, as homeowners then have to pay higher premiums, which may not be in the budget for many families.

And it's not only high-risk states facing skyrocketing insurance rates. Experts have found that average premiums have increased by 39% across the Upper Midwest over the last seven years and warn of further rate hikes because of more extreme weather events.

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Human activity — namely, the burning of dirty fuels — is the main driver of more volatile weather, as it leads to higher concentrations of heat-trapping gases in the atmosphere, which contributes to more severe storms and rising temperatures.

And while climate-resilient, energy-efficient homes can help communities be more prepared when disaster strikes, it's difficult to think about rebuilding if families don't have access to affordable insurance. 

What's being done to help?

California issued a mandate requiring insurers to offer coverage even in wildfire-prone areas, though homeowners will likely pay to offset the risk. Organizations and insurance commissioners in North Carolina are fighting to keep rates low for residents who lost their homes during Hurricane Helene.

Some homeowners who lost homes in wildfires have turned to a natural building material humans have relied on for thousands of years to rebuild: dirt, or more specifically, mud bricks, which are what Indigenous communities used to build adobe homes in the Southwestern U.S. Using earth-based, durable materials not only lowers construction costs but also potentially reduces homeowners insurance costs.

A major way to help insurers and homeowners is to reduce the pollution your home and car produce by switching to electric vehicles and energy-efficient appliances, like induction stoves or heat pumps.

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