Climate Change Drives Rising Home Insurance Costs and Coverage Gaps

While many associate climate change with environmental or health impacts, the financial toll on the insurance industry is becoming impossible to ignore. Extreme weather events like wildfires, floods, and hurricanes are becoming more frequent and destructive, driving a sharp increase in property and casualty claims. This has forced insurers to reassess their risk models, increase premiums, and, in many cases, withdraw from high-risk areas altogether.

In the United States, 2023 saw over $65 billion in insured catastrophe losses, and the trend shows no signs of slowing. From 2021 to 2024, average homeowner premiums rose 27% nationally, with even steeper hikes in states like California. As insurers struggle to balance escalating risks with sustainable pricing, many homeowners are left with limited or unaffordable coverage options. Some can no longer secure insurance at all, impacting property values and threatening access to mortgages.

Government programs like FEMA’s National Flood Insurance Program and state-run insurers of last resort in California and Florida have stepped in, but they face significant financial and structural challenges. As the climate crisis intensifies, both public and private insurance systems are under unprecedented pressure, and a long-term solution remains elusive.

The future of home insurance lies in proactive adaptation. This includes evolving underwriting practices, incentivizing resilient construction, and possibly even supporting ‘climate migration’ from high-risk zones. Without serious mitigation and adaptation efforts, the nation faces a growing insurance and housing affordability crisis driven by climate volatility.