Tuesday, February 11, 2025
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Increasing Number of Americans forgo Home Insurance, Putting Themselves at Risk of Financial Ruin

“Climate Change Impact: Homeowners Struggle to Afford Insurance Premiums, Risk Financial Ruin”

According to new government data from the National Association of Insurance Commissioners and the Federal Insurance Office of the U.S. Department of the Treasury, homeowners in areas most exposed to climate disasters are increasingly struggling to pay their insurance premiums. This trend is leaving many homeowners vulnerable to financial ruin as climate change makes home insurance costlier and harder to maintain.

The Treasury Department analyzed information from 246 million insurance policies issued by 330 insurers nationwide from 2018 through 2022, providing the most comprehensive look yet at the impact of climate change on the American home insurance market. The data revealed that the cost and frequency of insurance claims are rising rapidly in high-risk areas identified by the Federal Emergency Management Agency (FEMA), putting financial stress on insurers and homeowners alike.

In response to the escalating costs, more homeowners are being dropped from their insurance plans through cancellations or nonrenewals. Cancellation rates were highest in coastal areas in the Carolinas, West Virginia, Arizona, and California, where homeowners failed to pay their premiums. Nonrenewal rates were also higher in high-risk areas, such as coastal South Carolina, parts of California affected by wildfires, and areas in Tennessee hit by severe storms.

The destabilization of the home insurance market not only impacts homeowners but also threatens property-tax revenues for communities and local businesses that rely on homeowners as customers. The Treasury Department’s efforts to gather data were complicated by political clashes over climate change and insurance regulation, with some states choosing not to participate in data collection.

The Treasury Department called on state commissioners and the National Association of Insurance Commissioners to work with the Federal Insurance Office to gather and publish data annually, including information from high-risk insurance plans. However, the future of this collaboration is uncertain, as some Republican state insurance commissioners have urged the abolition of the Federal Insurance Office, claiming that its data on climate change is flawed and misleading.

Overall, the data highlights the growing financial impact of climate change on homeowners and the challenges they face in maintaining adequate insurance coverage in the face of increasing risks.

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