Recent research suggests that the Federal Emergency Management Agency is woefully underestimating the number of properties at flood risk, according to USA Today.
What’s happening?
A report by First Street analyzed the relationship between mortgage defaults and physical climate risks. It found that a majority of counties had more properties at flood risk than FEMA had identified.
For example, 11.4% of properties in Letcher County, Kentucky, were in a special flood hazard area, according to FEMA, while First Street put the number at 60.6%.
Overall, the report found that the annual costs of dealing with climate damage have increased by 1,580% in the last four decades.
“There’s an indirect effect of additional cost of homeownership that people didn’t expect to have when they first took out their mortgage, which is being indirectly driven up because of the increasing severity and frequency of climate risk,” First Street head of climate implications Jeremy Porter told USA Today.
Why is home insurance important?
Without proper flood assessments, properties won’t be subject to mandatory insurance. When disaster strikes, uninsured homeowners may face a crippling financial situation. Even with coverage, First Street found that a 1% increase in premiums resulted in a 1% increase in foreclosures.
Other studies have confirmed that rising climate risks are both driving up insurance costs and eliminating the possibility of coverage in some areas.
The insurability of property affects its price on the open market. As climate risks make more properties effectively unsellable, the U.S. Senate Budget Committee expects a housing market crash akin to that of 2008.
What’s being done about home insurance?
Homeowners can do their part by attacking the root cause of increasingly extreme weather events.
Household energy emissions are a major contributor to these destructive patterns. Upgrading to a heat pump, installing solar panels, and switching to an induction stove are all ways to reduce pollution and ultimately stabilize rising climate-based insurance costs.
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Alice J. Roden started working for Trending Insurance News at the end of 2021. Alice grew up in Salt Lake City, UT. A writer with a vast insurance industry background Alice has help with several of the biggest insurance companies. Before joining Trending Insurance News, Alice briefly worked as a freelance journalist for several radio stations. She covers home, renters and other property insurance stories.