How Climate Drives Insurance Rates and Property Damage

How Climate Drives Insurance Rates and Property Damage

Weathering the Unexpected

In the wake of recent storms, many property owners are realizing how unpredictable the weather—and their insurance coverage—can be. Severe weather events are becoming more frequent and more destructive, pushing property owners and insurers to the brink of financial strain. Understanding the relationship between climate risks and property insurance premiums is crucial for anyone looking to protect their property and finances best. 

The Increasing Frequency and Severity of Natural Disasters

It’s no secret natural disasters are occurring more frequently. According to the National Oceanic and Atmospheric Administration (NOAA), the U.S. experienced 18 weather-related disasters in 2022, each causing at least $1 billion in damage, tying 2022 with 2011 and 2017 for the third-highest number of such events. This continues a trend of increasing disaster frequency and severity driven by factors like higher temperatures and extreme weather events.

The Impact of Climate Risks on Property Insurance Costs

Areas prone to natural disasters, such as hurricanes, wildfires, and tornadoes, are seeing significant increases in their insurance premiums. The Insurance Information Institute (III) reports that average home insurance premiums have risen by about 7% annually since 2017. The New York Post reported, “At $11,759, Florida has the highest average home insurance in the nation. In 2023, Floridian homeowners paid an average of $10,996 for coverage.” States like Nebraska, Oklahoma, and Louisiana also experience high insurance costs due to their exposure to tornadoes and hailstorms. 

The Cost of Rebuilding is Rising

One of the primary reasons for rising insurance costs is the increasing cost of rebuilding homes after disasters. According to the National Association of Home Builders (NAHB), “Building materials prices are up 19.2% year over year and have risen 35.6% since the start of the pandemic.” This increase, paired with labor shortages, is driving up insurance premiums as insurers adjust for the higher claims payouts required for repairs. 

Credit Scores—An Overlooked Factor in Insurance Premium Rates

Beyond the risks of the climate driving insurance rates, your credit score plays a surprisingly large role in determining your insurance rates. Insurers often use credit-based insurance scores to assess the likelihood of filing a claim. Nerd Wallet found “that a person with good credit would pay $1,915 per year for homeowners insurance, on average. But in most states, someone with poor credit would see an average premium of $3,320 per year — more than 73% more.” This factor means that even if you live in a lower-risk state, a low credit score can still result in significantly higher premiums.​

Documenting Damage is Essential for Claim Success

When disaster strikes, your ability to document damage could be the difference between a fair payout and being left to shoulder repair costs on your own. Claims are often underpaid or denied due to poor documentation. Insurance carriers often seek ways to minimize payouts when evidence is lacking. Our team is here to help you set a strong foundation for your claim—starting with proper and thorough documentation. Contact our team today for claims assistance!

Push for Fair Treatment

Many property owners don’t realize that they can negotiate their insurance claims. A significant number of people who accept their insurer’s first settlement offer end up with less than the full value of their claim. This is where public adjusters come in. A public adjuster represents the policyholder—not the insurer—and can help fight for you to receive the payout you’re entitled to per your policy. They are skilled at negotiating with insurance carriers and often help policyholders recover more than they would on their own.

Planning for the Future

The rising cost of insurance and increasing frequency of natural disasters means property owners need to take a proactive approach to protecting their property. Understanding how local climate risks, insurance regulations, and economic trends impact your premiums will help you make better decisions. Consider reviewing your policy annually and consult with professionals to ensure you have adequate coverage for the specific risks in your region.