Home insurance companies are either raising rates significantly or pulling out of weather-battered states such as Florida and Louisiana, leaving homeowners in a tough position.
The aftermath of a rare winter storm that recently impacted southern states in the U.S. could make the homeowners insurance crisis even worse.
What is the homeowners insurance crisis?
As the warming climate continues to increase the severity and/or frequency of extreme weather events — such as hurricanes, floods, wildfires, and snowstorms — many insurance companies have been forced to raise premiums or cut coverage in the most vulnerable states.
Louisiana and Florida are among the states most impacted by rising insurance rates and nonrenewals, as rising sea levels, devastating floods, and increasingly intense hurricanes have become a regular occurrence along the Gulf Coast.
Worsening natural disasters have made it much riskier and less profitable for insurers to continue operating in these states. Some companies, such as Farmers Insurance and AAA, have already exited or discontinued some of their coverage in Florida, adding to a growing list of insurance companies to abandon customers.
In Louisiana, at least 12 large companies fled the market after the state was slammed by four major hurricanes in 2020 and 2021, leaving homeowners scrambling to find affordable coverage.
According to Newsweek, the unprecedented winter storm that hit both states in January could exacerbate these issues. Parts of Florida and Louisiana received 8-10 inches of snow, shattering previous records. Most homes in the South aren't built for extremely cold weather, so heavy snow and ice can cause burst pipes and roof damage.
As unusual weather events like these become more frequent, insurance premiums could get even more expensive, and some homeowners may have to pay out-of-pocket for repairs if insurers don't offer policies for weather that is atypical for their area, such as snowstorms.
Why is this important?
Home insurance is necessary to protect homeowners from devastating financial losses in the event of severe weather. However, insurance companies are also incurring huge losses as the changing climate is resulting in larger insurance claims. When insurers raise rates in response, homeowners often have few affordable options.
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No way 😨 Homeowners who are dropped from their coverage or can't afford to renew it can turn to state-run programs as a last resort. But, in some cases, these policies can be even more expensive and have more limitations than private insurance.
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For example, beginning this year, 34 states and Washington, D.C., offer or will offer state-run Fair Access to Insurance Requirements (FAIR) insurance policies to high-risk customers, according to Bankrate. These plans generally cover less than typical home insurance policies and only insure homes at actual cash value rather than their replacement cost.
It may be harder to obtain coverage for winter storms in states like Florida and Louisiana, considering their rarity. Still, it's worth considering all your options, as Pierre A. Louis, senior managing attorney at Louis Law Group, told Newsweek.
"It's important to remember that the purpose of insurance is to protect you from covered perils. If you have legitimate snowstorm damage, it generally makes sense to file a claim rather than avoid doing so out of fear of potential rate increases. Otherwise, you're not fully utilizing the coverage you're paying for," Louis said.
What can homeowners do to protect their properties?
First, it's a good idea to shop around for the best deals on home insurance in your area if your provider has recently hiked rates. State-run programs — while not ideal for most homeowners — can still provide peace of mind if you live in a high-risk state and are better than having no insurance.
If your home was damaged in the recent snowstorm, the best thing you can do is document the damage and file a claim with your insurer. You can also weatherize your property by investing in extra attic insulation and air sealing, which can help protect it from frozen pipes in the future.
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