Climate Change Drives Up the Cost of Homeowner’s Insurance

Climate change worldwide is taking money from our pockets in ways we never imagined. One of those ways is the higher cost of homeowner’s insurance.

The skyrocketing cost of homeowner’s insurance has caused people in West Virginia to underinsure their homes or go without insurance altogether. Underinsured means the policy is not enough to rebuild the home in a total loss.

The premium cost of homeowner’s insurance in West Virginia has risen almost 9% since 2018. But regular homeowner’s insurance doesn’t even cover flood damage, the risk we should be most worried about.

So far West Virginia has avoided the major hurricanes and wildfires that drive up costs in Florida and California. But extreme weather disasters in other states cause our rates to go up. West Virginia law allows insurance companies to set rates considering loss experience outside the state and to catastrophe hazards and all other relevant factors within and outside this state.

Almost all insurance companies buy reinsurance, which is an insurance policy to help insurance companies pay claims if they occur. Reinsurance spreads the risk to a larger pool than just West Virginia or even the U.S. That means that extreme weather events anywhere in the world could cause the premiums for reinsurance to rise. When reinsurance premiums rise, your homeowner’s insurance company’s cost to operate rises. Guess who pays for that?

“Insurance is where many people are feeling the economic impacts of climate change first,” said Carolyn Kousky, associate vice president for economics and policy at the Environmental Defense Fund. “That is going to spill over into housing markets, mortgage markets, and local economies.”

Extreme weather caused by climate change hurts West Virginians in their pocketbooks. Isn’t it time to Fix It?