Buckle Down, Your Household Insurance May Disappear

If you own a home — whether a house, a condo, or a trailer — you’ve probably noticed an increase in the cost of property insurance. Well, “increase” is an understatement. Since January 2023, premiums on homeowner’s insurance have taken off as the Bureau of Labor Statistics graph below shows.

The hike isn’t a hockey stick exactly, but it’s a sudden jump that you wouldn’t want to climb if it were a hill and you hadn’t been active. Between January 2023 and November 2024, the increase has been almost 18% and that’s likely to continue its rise.

The problem is climate change. Heavy damage from natural phenomena — tornadoes, hurricanes, flooding, and wildfires — has been on the rise for decades. Insurance companies kept saying that the total covered damages have been growing for years and that it ultimately wasn’t sustainable.

Just in mid-December, the U.S. Senate Committee on the Budget announced that it was releasing public data and a staff report “that expose the scale of the climate change-driven crisis in homeowners’ insurance.” It’s the first time that there was an examination of insurance non-renewals at the country level from all 50 states and the District of Columbia.

Covering 2018 through 2023, the report shows how climate change is affecting whether households can get insurance. Without it, getting a mortgage is next to impossible because lenders don’t want to see a property destroyed with no way to recover the value.

States and counties most exposed to climate-change risks are among those with the highest non-renewal rates and the highest non-renewal rate growth.

You might expect that such states as Florida, California, and Louisiana would be on the list, and you would be correct. But the problem is much broader. Southern New England, parts of Montana, coastal regions of New Jersey, New Mexico, the Carolinas, Oklahoma, and Hawaii are all coming up behind. With all of the high-profile damage Texas has felt from storms, it isn’t in the top ten of non-renewal rates.

The connection to climate change is clear. “Across the United States, there is a clear positive correlation between rising non-renewal rates and rising premiums,” the committee wrote. That doesn’t necessarily mean causation, but the connection suggests a causal effect is highly likely. When insurance companies have to spend more to reimburse loss, they have to eventually make that money back to continue offering insurance, making climate change a major cost-of-living issue.

There is a secondary impact as well. When insurance is unavailable and mortgages are unavailable, property values are likely to plunge. Valuations are based on the dynamics of supply and demand. The vast majority of buyers will need a mortgage. If they are unavailable, the demand for a property is limited to those who don’t need a loan — a small percentage of buyers. When there isn’t enough demand, the values of properties fall. When there isn’t enough demand, the values of properties fall. The study “a collapse in property values with the potential to trigger a full-scale financial crisis similar to what occurred in 2008.”

Unfortunately, the suggested way to stop a major property value collapse is to move toward renewable energy faster and eliminate carbon pollution. That would seem logical, but hardly efficient and realistic.

Other solutions will be necessary like people moving out of areas that face heavy exposure to danger. The federal government or states could set up high-risk insurance. But that will be a heavy expense and potentially allow people to stay in areas that have become too dangerous.