Millions of American homeowners are confronting a growing financial dilemma as climate change-driven wildfires and floods push their home insurance rates to unprecedented levels. The situation is compounded when insurers decide to withdraw coverage.
A recent analysis by the First Street Foundation reveals that some parts of California are becoming uninsurable, and this trend extends to other states, affecting both coastal and inland regions.
As climate change escalates, the insurance industry is responding by raising rates, imposing higher deductibles, and, in some cases, entirely withdrawing coverage in regions most affected by climate change. States such as Florida, Louisiana, and California are witnessing the steepest increases in insurance costs. Homeowners in these areas are often forced to turn to state-run insurance programs, which provide less coverage at high costs.
The repercussions of insurers pulling coverage extend beyond financial strain; they significantly devalue affected properties. For instance, in Florida, a homeowner who loses insurance coverage could see their property’s value drop by a substantial 19% to 40%.
In response to skyrocketing insurance costs and coverage limitations, some homeowners in high-risk regions are making the drastic decision to forego disaster insurance altogether. This trend is not limited to coastal areas; even residents of inland states like Kentucky, South Dakota, and West Virginia are feeling the financial strain of rising insurance costs driven by extreme weather events.
The scale of this crisis is immense and expanding. 6.8 million properties have been impacted by higher rates, canceled policies, and reduced valuations. An additional 35.6 million homeowners could potentially face similar issues in the future, according to the First Street Foundation.