Analysis shows that homeowners insurance premiums in California are estimated to rise 21% this year, and many other states will also see significant increases.
What's happening?
According to CNBC, the online marketplace Insurify expects an average 8% increase in insurance premiums in all 50 states. Louisiana's change is the biggest, with premiums projected to jump 28%. But hefty increases are expected even in landlocked states such as Iowa and Minnesota.
"It's not just a story for areas like coastal Florida or the wildfire prone parts of California. It's really a much more national story," Benjamin Keys, real estate and finance professor at the University of Pennsylvania's Wharton School, explained to CNBC.
Even though each state regulates premiums, there is a "ripple effect," as a disaster in one state can impact premiums in another.
"Home insurance is just becoming a bigger and bigger chunk of people's monthly housing payments," Chase Gardner, data insights manager at Insurify, told CNBC.
Beyond rising premiums, many homeowners are struggling to obtain insurance. Nonrenewal rates have increased, leaving many without adequate insurance. Thousands of California policyholders were dropped by State Farm just before wildfires hit Southern California in January.
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What do rising premiums mean?
The rising cost of homeowners insurance can be attributed to extreme weather events, including wildfires, heat waves, floods, and other severe storms.
"An event like [the wildfires] in California just has a really significant impact on how much we project premiums to go up," Gardner explained, per CNBC.
The climate crisis — caused by problems such as weakened biodiversity, rising temperatures, and disrupted nutrient cycles in the ocean — supercharges these extreme weather events.
For example, higher temperatures caused by polluting gases trapped in the atmosphere spur worse wildfire seasons. Gases such as carbon and methane — which are largely created through human activities including manufacturing, transportation, and agriculture — increase Earth's temperature, causing unstable climate conditions and making extreme weather even more dangerous.
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Under $1K 😎 What's being done to regulate insurance premiums?
State regulators are facing challenges, balancing the need to help homeowners and support insurance companies. Restricting premium increases can lead to higher nonrenewal rates, which is arguably worse for homeowners.
Reducing the human impact on the changing climate can help stabilize weather conditions, possibly bringing insurance rates down in the future.
Efforts including using less plastic, switching to an electric vehicle, or taking local action to protect wildlife habitats can help the environment and create a cooler, cleaner future with affordable, accessible insurance for all.
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