Global Warming & Your Insurance Premiums

Global Warming & Your Insurance Premiums

With so many scientific advances taking place in order to best measure (and possibly control) changes in climate, the insurance industry is assessing how to best control risk factors while affording property owners safety nets in the event of loss or damage.  

In 2019, the Urban Land Institute authored a publication entitled “Impacts of Climate Change on Real Estate”, penned under government authority.  This report detailed the effects of the ever-changing climate on real estate due to increased reported “extreme events”, their intensity, and the widespread ground which they cover.  As a result, insurance companies are doing all they can to best manage such changes.  

Meanwhile, The Insurance Journal, which originated in 1923, highlights monumental losses which have occurred as a result of extreme weather.  This information only serves to propel the insurance industry to reevaluate its traditional business models as manifested in increasing home insurance rates.  In fact, the rates more than doubled from 2005 to 2015.  This spike has been primarily credited to natural disasters.  The problem, so to speak, is that everything has its limitations.  Insurance providers are no exception.  While insurance carriers are more responsive in managing increasing losses, they are limited in the regions which they cover as well as the authorized amounts of coverage they are able to provide.  In some cases, homes and properties are not even considered insurable.  Insurance companies cannot be forced to take on risks or regions which they deem high risk as long as their decisions can be justified on paper.  

The question of how to best protect real estate investments and assets still stands.  Investors need to take an active part in risk assessment BEFORE purchasing new properties.  As with most things in life, everything has a delicate balance, so just because there are risks involved, does not mean the property might not be worth the purchase.  Your best bet: proceed with an experienced investment realtor.

Related: 5 Surprise Expenses for New Homeowners

Moderate risks can often be mitigated or averted via the appropriate maintenance and careful planning.  In most cases, you might find that you can control the various effects of climate change regardless of the fact that you cannot forecast all impending risks.

Related: Hope for Big-City Investors

In closing, it is important to note that your insurance carrier is not the villain in an otherwise romantic fairytale.  In fact, insurance companies are businesses looking to profit just as you might be an investor hoping for a great return on your next investment property.  Tried and true basic business principles are unfailing, however, the execution must be reevaluated from time to time via continued education, risk assessment, and continual research.

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Phil Aitken, Owner/Broker
Phil Aitken is the Owner/Broker with Your Home Sold Guaranteed Realty - Phil Aitken Home Team and has over 13 years of Real Estate experience. Phil’s faith and desire for his family’s continued security fuel his business growth and leadership. The Phil Aitken Home Team continues to profoundly impact the people of Jacksonville via supporting several faith-based organizations. Phil gives back a portion of every real estate transaction to The Tim Tebow Foundation and Rethreaded. Find Phil's full story here.