Buying a home in one of these 9 climate-risk states? Here’s how to deal with spiking home insurance rates from someone who lives in one
An aerial shot of homes in Orlando, Florida.
Finding an affordable home in a red-hot real estate market is already a tremendous feat.
And now, in addition to rapidly rising prices, home buyers are increasingly worried about another factor: climate change.
According to Zillow, more than 80% of home buyers considered climate risks — including flood, wildfire, and hurricane — when shopping for a house.
In particular, climate change complicates the homebuying process by sending home insurance premiums skyrocketing. As storms and other natural disasters become more destructive, home insurance providers are raising rates or pulling out of certain states altogether, according to insurance company Insurify.
According to Holden Lewis, a home insurance expert at NerdWallet, climate change is hitting states such as California, Florida, North Carolina, Tennessee, Virginia, Texas, Oklahoma, Kansas, and Nebraska the hardest — and wildly disrupting these states’ home insurance markets.
If you’re looking to purchase a house in these high-risk markets, here’s what you need to know about rapidly rising home insurance rates.
How to navigate the insurance landscape when moving
As climate change exacerbates the frequency and severity of natural disasters, homes are at higher risk of damage. Insurance companies in turn are raising prices to cover the higher costs of covering claims and reinsurance, or insurance for insurance companies.
According to financial data firm Bankrate, the national average cost of home insurance is $2,285 a year for up to $300,000 of dwelling coverage. But in high climate-risk states such as Nebraska, Florida, and Oklahoma, average annual premiums range from $4,835 to $5,655.
It might seem obvious, one step homebuyers can take to avoid surprises is consider home insurance costs early in the homebuying process, Lewis said. As insurance premiums increase, they can materially impact your monthly housing payments and push a home out of your affordability zone.
Prospective buyers shopping for homes in a new state are especially prone to insurance sticker shock, according to Lewis. For example, if you’re thinking of moving from Ohio to Texas, you might not be aware that the average homeowners insurance rate in cyclone-prone Texas is $3,916 a year — $2,600 more than in Ohio, Lewis pointed out.
Still, climate-risk states remain popular. According to U-Haul, Texas and Florida received the highest influx of new residents in 2023.
Many of these newcomers might not have done their homework on the home insurance market before moving to the state, according to Stephanie L., homeowner and lifelong Florida resident who asked not to use her full last name for privacy reasons.
There’s a lack of consumer awareness of the financial risk extreme weather brings, in Stephanie’s opinion. “If you purchase a beautiful home on a river, you have to understand that with the way storms come in, you could be at risk,” Stephanie told B-17 in an interview.
Even within climate-risk states, you can minimize your home’s exposure to extreme weather and bring down insurance premiums by researching the local neighborhood.
When Stephanie bought her house, she picked a location in the Jacksonville metropolitan area, which has less exposure to hurricane risk than other areas of the Sunshine state.
“We definitely looked for high and dry, not in a flood zone, and not in a hurricane evacuation zone,” Stephanie said.
Indeed, Jacksonville home insurance premiums are significantly lower than Florida’s state average of $5,527, with homeowners paying an average of $2,705 a year for insurance according to Bankrate.
Next, when it comes by a natural disaster, you want to ensure that the insurance policy can fully cover rebuilding costs. Many policies offer dwelling coverage limits in line with the market value of the house, but that’s not always sufficient coverage, according to Lewis.
“The market value of the house the day before a fire or storm might be less than the actual cost to rebuild it to current building codes,” Lewis said.
For prospective homebuyers, Lewis recommends clarifying the dwelling coverage limit with the insurance agent and shopping around for available policies.
Also important to note is that flood coverage often isn’t included in standard homeowners insurance policies. This is an important consideration if you’re looking to buy a house in an area prone to hurricanes.
“If water is rising, say from a river, or storm surge, then a standard homeowners policy will not cover that damage,” Lewis said.
Stephanie purchased flood insurance in addition to her regular homeowners insurance when she purchased a home.
“I also have a separate flood policy even though I’m not in a floodplain,” she said. “When you’re not in a flood zone, flood insurance is pretty affordable.”
Although Stephanie isn’t at high risk for flooding, she still wants to be prepared for the worst. It’s not a bad idea to go the extra mile and purchase extra insurance when it comes to buying a home in Florida, even if you’re not directly in a flood zone.
In addition to hurricane-prone Gulf Coast states, regions like western North Carolina, eastern Tennessee, and southern Virginia are flooding hotspots, according to Lewis.
Lastly, homeowners also should consider how inflation will drive up home insurance costs, especially as concerns over inflation loom high in today’s economy. An inflationary environment will increase the cost of building materials and construction, Lewis pointed out.
As a result, it may be a good idea to review your coverage every year or two to evaluate the status of your coverage, Lewis said.
“Talk to the agent, maybe even talk to a general contractor just to find out, ‘Hey, am I still covered? Do I still have enough coverage to pay to rebuild this home?'” Lewis suggested.
For those considering buying a home in a state with high levels of climate risk, taking these precautions during the homebuying process can help you protect your investment.
