Why are home insurance prices going up?

American homeowners are experiencing the climate crisis in the most tangible of ways: Home insurance is becoming more costly across the country as companies pay ever-higher costs to fix the damage of climate-driven weather events.

"Insuring your home has never been harder," said The Washington Post. Americans are finding homeownership more costly and even impossible as "insurance costs balloon beyond their ability to pay." There are a lot of reasons for this, and "intensifying climate risk" that causes "more costly and uncertain extreme weather events" is chief among them. Americans keep moving into areas that are vulnerable to storms. And weather disasters keep costing insurers lots of money. The biggest problem? Hail. "Because the risk is going up," said Nancy Watkins, an insurance analyst, "prices will go up."

"Higher home insurance rates are here to stay," said The Wall Street Journal. That might be the best-case scenario: Many homeowners face "increasing risk of nonrenewals, reduced coverage" or special conditions, like paying for a new roof, to remain eligible for coverage. But the insurance companies have good reason to raise rates, said the Journal: "Insured losses from U.S. storms have grown 8% a year for more than a decade."

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What did the commentators say?

"The answer isn't to patch a broken system; it's to reimagine it," Zac Taylor said at The Tampa Bay Times. Hurricane-prone Florida is particularly hard-hit by the insurance crisis — premiums there have risen 102% over the last three years. But "this crisis is collective, not just coastal." That means it's time to create housing resilience agencies that link "affordable insurance directly to risk-reduction efforts," Taylor said. Such agencies would advise builders and potential homeowners "where it's unsafe to build" and assist people who need to relocate "from high-risk zones."

One result of this trend is that "many houses in climate-risky areas will become stranded assets," Columbia Business School's Stijn Van Nieuwerburgh and Parinitha Sastry said at MarketWatch. To prevent this, government-backed mortgages should reflect the risk — it should be costlier to buy homes in high-risk areas. When mortgages in such areas are too cheap, "it encourages building in dangerous locations and having people move there," Nieuwerburgh and Sastry said. Raising the price of mortgages in disaster-prone regions sends the "proper signal to potential buyers about the climate risks of each location they are considering."

What next?

The ripple effects could be devastating. "Communities that are deemed too dangerous to insure face the risk of falling property values," said The New York Times. That means "less tax revenue for schools, police and other basic services." But the trend is accelerating. In California, insurance nonrenewal rates have "increased more than 500 percent since 2018." Nonrenewal rates are rising across the rest of the country, as well. So far, though, the high costs haven't dissuaded Americans from flocking to disaster-prone areas. "They may cuss us out," said Jay Taylor, a South Carolina insurance agent. "But they never stop building."