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Americans Drop Home Insurance as Climate Risks Increase

by Celia

Homeowners in regions most vulnerable to climate-related disasters are increasingly abandoning their home insurance policies, leaving them exposed to financial ruin, new government data reveals.

The findings highlight how climate change is putting American households under increasing financial strain, driving up home insurance costs, and making it harder to maintain coverage. This trend is especially concerning in areas frequently threatened by wildfires, hurricanes, and other natural disasters, which threaten the value of homes—the most significant asset for many.

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“Homeowners’ insurance is where many Americans are feeling the direct financial impact of climate change, as it hits their wallets,” said Ethan Zindler, climate counselor at the U.S. Treasury Department. “Climate events don’t discriminate by state or political beliefs. They affect everyone.”

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The rising rates of insurance cancellations are part of a broader pattern revealed by the Treasury Department, which analyzed data from 246 million home insurance policies issued by 330 insurers between 2018 and 2022. This represents the most extensive look at the impact of climate change on the U.S. home insurance market.

While homeowners with mortgages are typically required to maintain insurance, those who own their homes outright—often because the property has been passed down through generations—have the option to drop coverage.

Data shows that the costs and frequency of insurance claims are increasing rapidly in high-risk areas, as identified by the Federal Emergency Management Agency (FEMA). The financial strain on insurers is also growing, leading to higher premiums in the most vulnerable regions.

As the cost of insurance rises, more homeowners are being forced off their policies through cancellations and nonrenewals. Cancellations occur when homeowners fail to pay their premiums, while nonrenewals happen when insurers refuse to renew policies, even for paying customers. Both types of disruptions are more common in high-risk areas.

In 2022, more than 150 ZIP codes nationwide saw cancellation rates of at least 10% due to homeowners not paying premiums. These areas were particularly concentrated in coastal regions of the Carolinas—Hilton Head, Charleston, and Myrtle Beach—where hurricanes pose a significant threat. Other affected regions include West Virginia, Arizona, and California.

While the data does not explain why homeowners stop paying premiums, Nellie Liang, the Treasury Department’s undersecretary for domestic finance, suggests it reflects the mounting financial strain exacerbated by climate change. “Households can no longer bear the burden on their own,” Liang said.

The nonrenewal rates are also rising and are most pronounced in high-risk areas. The ZIP codes with the highest nonrenewal rates in 2022 include parts of South Carolina’s coast and California’s Sonoma and Yuba counties, which have been devastated by wildfires. Tennessee areas that have experienced severe storms also saw significant nonrenewal rates.

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Liang emphasized that the destabilization of the home insurance market extends beyond homeowners, potentially impacting local economies. Communities that rely on property tax revenue could see declines if homes lose value or homeowners are unable to rebuild. Additionally, local businesses that depend on homeowners as customers are also vulnerable.

As these trends worsen, experts warn that the strain on homeowners and insurers alike could result in further financial turmoil for families and communities already grappling with the effects of climate change.

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