Hurricane Beryl, a Category 5 storm, is poised to strike the Caribbean this week, heralding a potentially severe hurricane season. University of Miami researcher Brian McNoldy notes that Beryl is the strongest hurricane to form in June, an indicator that more devastating storms could follow as the peak hurricane season approaches.
Rising Homeowners Insurance Costs
The frequency and intensity of extreme weather events, fueled by climate change, have significantly impacted the United States, causing nearly $25 billion in damages through May alone, more than double the average for that period. As a result, insurance companies are increasing premiums to offset the higher number of claims.
According to the Consumer Price Index, 2023 saw a rise in insurance payments for renters and homeowners, marking the first increase in four years. Insurify, an insurance marketplace, predicts that average insurance costs will reach $2,522 this year, a 6% increase from last year. The location plays a crucial role in determining premiums, with states like Louisiana and Florida seeing higher costs due to severe weather conditions and limited insurance options.
Challenges in Obtaining Homeowners Insurance
Insurance companies are withdrawing coverage from areas prone to extreme weather. For instance, State Farm announced it would no longer offer coverage in California due to the increasing risk of wildfires. Homeowners dropped by their insurers may need to resort to force-placed insurance provided by mortgage lenders, although this is typically more expensive and considered a temporary solution until a new provider is found.
Regions experiencing extreme weather are also more likely to be covered by the Fair Access to Insurance Requirements (FAIR) Plans, as well as Beach and Windstorm Plans, which offer coverage for those dropped due to their high-risk locations.
Limitations of Basic Homeowners Policies
Basic homeowners insurance policies often exclude coverage for floods, mold, or wind damage in hurricane-prone areas. Given that a home in a high-risk area has a 26% chance of flood damage over 30 years, and even minimal flooding can cause significant financial loss, it’s crucial to prepare in advance. Homeowners can mitigate potential damage by raising their homes to prevent flooding or retrofitting them to withstand high winds. Such preventative measures may also lead to reduced insurance premiums.
As Hurricane Beryl approaches, it’s a timely reminder for homeowners to review their insurance policies, understand their coverage, and take necessary precautions to protect their properties from the increasing threat of severe weather.
