Homeowners Insurance Costs Soar as Climate Change Fuels Extreme Weather
Homeownership, often lauded as a cornerstone of the American dream, is becoming increasingly challenging, and not in ways many anticipate. A hidden threat – rising homeowner’s insurance costs – is emerging due to the escalating impacts of climate change.
The reality of a warming climate means a rise in severe weather events globally, the consequences of which are far-reaching. While property insurance has provided a financial safety net for some homeowners, helping them recover after devastating losses, insurance companies are now grappling with unprecedented financial strain. In response, they are reassessing risk and adjusting premiums, which could price many out of coverage.
Insurance Companies Rethink Coverage in High-Risk Areas
Several insurance companies are now responding to the financial risks associated with climate change. In December 2023, the Office of Financial Research reported that some insurers have started to stop renewing coverage in areas frequently hit by natural disasters. In other cases, states that have been heavily impacted by extreme weather are seeing insurance companies hike rates significantly.
After Hurricane Helene caused flood damage that destroyed many homes in western North Carolina, homeowners filed approximately $2.5 billion in insurance claims. Despite over $3 billion in federal aid, the need for assistance persists.
Joe Stewart, the vice president of government affairs for the Independent Insurance Agents of North Carolina, explained the situation: “Insurance is really what it costs to replace or repair something that’s been damaged,” he said. “If the cost of those things is going up, the cost to provide for the replacement or repair of them has to go up. So if lumber is more expensive, then the cost of insurance is more expensive because you have to buy lumber to repair a house.”
Rising Costs Driven by Climate Change
The trend of increasing insurance rates isn’t limited to North Carolina. As extreme weather events become more frequent, insurance companies across the country are adjusting their rates to mitigate financial losses. According to a Department of the Treasury press release from January 2025, homeowner’s insurance costs are rising at a rate 8.7 percent faster than the current inflation rate. In some states, such as California, which has been ravaged by wildfires, insurance companies are implementing even steeper price increases in response to rising claims.
The Treasury press release notes that areas affected by “climate-related perils” are seeing a surge in insurance claims. The average claims in these regions are $5,000 higher than the claims in areas with a lower risk of natural disasters.
From 1970 to 2023, the Environmental Protection Agency reported that the global average temperature increased by approximately 1.7°F. This dramatic rise is a result of harmful pollution from human activity, which contributes to more severe weather events, such as Hurricane Helene.
Efforts to Mitigate Rising Costs
While the insurance industry struggles with escalating costs, some organizations are working to ease the financial burden on policyholders. North Carolina Insurance Commissioner Mike Causey has been actively involved in preventing runaway rate increases.
“The insurance companies wanted to raise our homeowners’ rates up to 99.4% in some areas and an average 42.2% statewide in a single year,” Causey stated. “I fought for consumers and knocked them back to 7.5% increases over two years with a maximum of 35% in any territory. We consider this settlement a big win for both homeowners and North Carolina.”
