Insurance companies are significantly raising homeowners’ coverage costs to mitigate the growing risks posed by powerful storms, like those that devastated five states over the Memorial Day weekend. The storms left a trail of destruction in Arkansas, Kentucky, Oklahoma, Texas, and parts of Virginia, leveling homes and claiming at least 23 lives. The increasing frequency and severity of extreme weather events, which scientists attribute to climate change, lead to larger payouts by insurers, resulting in higher premiums for millions of Americans.
Dramatic Increases in Premiums
In Oklahoma, the price of homeowners’ coverage surged 42% between 2018 and 2023, according to an analysis from S&P Global. The state has already experienced over 90 tornadoes in 2024, more than double the usual number for this time of year. Additionally, Oklahomans have faced two Category 4 hurricanes this year, exacerbating the situation, Mulready noted.
Arkansas and Texas have also seen dramatic increases in homeowners’ insurance rates, with premiums rising 32.5% and 60%, respectively, between 2018 and 2023, per S&P Global. Meanwhile, some insurers continuing to offer coverage in states vulnerable to extreme weather are raising their rates. For instance, Travelers Insurance recently received approval from California regulators to raise homeowners’ rates by an average of 15.3%. Nationally, the average homeowners’ insurance premium climbed from $1,081 in 2018 to $1,522 last year for single-family property owners with a 30-year home loan, according to mortgage buyer Freddie Mac. This trend reflects the broader impact of climate change on insurance markets and homeowner finances.
Financial Risks and Impacts
A May study by the Federal Reserve highlighted that property damage from natural disasters is one of the largest financial risks a homeowner can face. Nearly 20% of U.S. adults reported being financially impacted by a natural disaster or severe weather event in the past year. This financial strain underscores the urgent need for homeowners to prepare for and mitigate the risks associated with extreme weather.
As insurance costs continue to rise, homeowners must adapt by reinforcing their properties, staying informed about climate-related risks, and considering additional financial safeguards. The growing burden of insurance premiums is a stark reminder of the broader economic impacts of climate change, affecting not just the environment but also the financial stability of households across the nation.
The intersection of climate change and the insurance industry presents significant challenges. Homeowners, policymakers, and insurers must work together to address these challenges, ensuring that coverage remains affordable and accessible while promoting resilience and preparedness in the face of an increasingly volatile climate.