The world has faced a series of unexpected crises and challenges since early 2020. From the COVID-19 pandemic to political outrage, and the looming potential of a stock market crash, times are certainly challenging. Among those challenges is the climate crisis. This year alone we’ve seen bizarre and deadly weather patterns, ranging from 3-state wide tornadoes to massive wildfires. Unfortunately, these occurrences have caused home losses and severe home damage. With the climate crisis expected to continue, and potentially worsen, now is a crucial time to purchase or update your homeowner’s insurance.
Climate Change Outlook for 2022
The Intergovernmental Panel on Climate Change aims to research and report on the patterns of climate, the vulnerabilities, the challenges, as well as expectations for upcoming years. In their latest report, AR6 Climate Change 2021, the contributing authors touch upon the scientific evidence of climate change’s progression. They note that “widespread and rapid changes in the atmosphere, ocean, cryosphere, and biosphere have occurred” and conclude that each year the effects worsen.
According to the report, human-induced climate change is causing weather extremes in all regions across the globe. These extremes are evident in the rising frequency of heatwaves, heavy rain, cyclones, tornadoes, droughts, fires, and rising sea levels. Even though outwardly there seems to be an effort to reduce or reverse climate change, a lot of damage has already been done. Every single region in the world is more vulnerable now than ever before to experience extreme weather.
What does that mean for your risk? In general, everyone’s risk is going up. It also means your risk is in a volatile state, meaning it could raise significantly with little to no upfront notice. This is just one reason why discussing your home and insurance plan with an agent before events happen is important.
Catastrophic Losses
According to the Swiss Re Institute’s recent report on catastrophic insurance losses, extreme weather events worldwide exceeded $100 billion. This is only the third time since 1970 that weather extremes have caused losses this high. The two largest losses in 2021 were Hurricane Ida, and Winter Storm Uri in Texas. The National Center for Environmental Information reported a total of 18 Natural Disasters in the United States alone causing 1 billion dollars of damage each.
The 2021 California wildfires incurred extreme damage. They were a tragic but accurate depiction of potential home damage due to current weather patterns, with an estimated 3,629 buildings destroyed. Most of us in the United States remember seeing these fires on the news.
Fires, in general, are nothing new, and most of us have seen them on tv our whole lives, or been warned about them in high-risk areas. The issue is that these natural occurrences are no longer natural. They are extreme versions of what they once were and threaten the lives and homes of American citizens. Economists are now suggesting that almost every property in the U.S. has exposure to perilous risk. Not every property has insurance, and those who do may not have enough.
How To Evaluate Your Risk
Humans are extremely adaptable, and no matter the crisis we face, we can find tools and assets to navigate the new landscapes. Homes are some of our most valuable assets, and with the rising risk of weather, a new set of tools and resources have been made available to better protect your assets. Maps and data are now available for homeowners to access their risk to different climate catastrophes based on their location. This information is extremely useful in deciding which coverages you should elect for homeowners insurance. For example, flood is not typically included in a standard homeowners package- so if you’re in a high-risk area you can elect to purchase a stand-alone policy to address that risk.
Sometimes the simplest google search will pull up tons of resources you can click through to evaluate your risk and compare reports on your location. In the event your research does not feel sufficient, talk to your insurance agent for more clarification. Even if you don’t think you’re in a high-risk area, coverage is important. Climate is now entirely unpredictable, and locations previously thought to be safe are experiencing detrimental losses.
Hurricanes and tornadoes are other risks to be aware of. Most insurance policies may cover some portion of wind damage, but purchasing a separate windstorm policy is ideal for anyone in high-risk areas. Though this will incur increase insurance premiums, the cost of the policy is going to be pennies compared to a loss if your home experiences a catastrophic event. Again, your risk can be determined using data maps or by comparing your location to the statistics of weather events in the area.
What a Standard Insurance Policy Will Cover
Insurance policies are built to protect you. So the short answer is yes, some things are covered. In some cases, fires, tornadoes, and hurricanes may have some coverage depending on the policy you chose to purchase. On the other hand, floods and earthquakes are almost always excluded. Though most U.S citizens do carry homeowners insurance, close to 45 % of people are unaware that flood is not included. This is a considerably high number since the flood is one of the most common losses. The National Flood Insurance Program can help secure flood coverage for you, based on your location.
All other additions can typically be made through your agent or broker. While it can be tempting to wait until an event happens to purchase coverage, planning ahead is crucial. Your losses won’t be covered unless your policy has been active before the event. Additionally, most insurers won’t allow a new policy or coverage endorsement to be added within 30 days of an event. In today’s current climate, you must evaluate your risk and plan accordingly, ahead of time.
