A house model on a stack of coins

It’s getting harder for insurance companies to balance their risks as average temperatures rise.

It’s one the bitterest messages you can get: A sterile form letter telling you that you’re getting dumped. And when it’s from your insurance company, it’s clear that it’s not them — it’s you. Even if you’ve always picked up the check, never made a claim, and kept your home in order, they think you’ve become too much trouble to handle.

There might be some cold comfort in knowing you’re not alone: The US is bursting at the seams with insurance relationship drama.

In California, thousands of residents this year have already received notices that their insurers don’t want them as customers. Major companies like State Farm and Allstate have stopped signing new policies in California, while others have left the state entirely.

Progressive Insurance dropped 100,000 homeowners in Florida from their rolls in April. Legislators in Louisiana voted to make it easier for insurance companies to drop their customers, even as companies there have already cut off tens of thousands.

And if you still have a policy, it’s getting more expensive. Across the United States, home insurance rates rose an average of almost 20 percent between 2021 and 2023. Without this insurance, homeowners are on the hook for losses when a hurricane bears down or a wildfire tears through. And if they’re still paying off the house, the lender could foreclose on the property if coverage lapses.

That’s making a lot of people pack up and leave. In Florida, one in three residents dropped by their insurer have moved or are planning to move, according to data released last month by Redfin.

The core of all this discontent is that insurers are struggling to stay afloat because the risks they have to protect against are mounting, driven in part by climate change. As average temperatures rise and disasters reach greater extremes, the magnitude of losses mounts, rendering parts of the US uninsurable.

“We can’t stabilize insurance markets without dramatically reducing our climate risk,” said Carolyn Kousky, who studies insurance as the associate vice president for economics and policy analysis at the Environmental Defense Fund.

There are ways to navigate through these rough patches, but getting through an insurance breakup is a bit different from, you know, a normal breakup. Here’s what you need to know.

What you can do if you’re not in good hands or your good neighbor isn’t there

One option, according to the Consumer Financial Protection Bureau’s (CFPB) guide to home insurance cancellations: Ask your insurer to reconsider. You don’t even have to hold up a boombox outside your insurance agent’s office — just call and ask why you were dropped and whether there’s anything you can do to make them reconsider, like installing fire alarms or upgrading fixtures.

For the most part — federal flood insurance being the main exception — insurance companies are regulated at the state level, and state insurance commissioners establish what their policies must cover and limit how much they can charge customers.

But insurers are for-profit businesses, and if they pay out more than they make, can’t increase premiums to cover the difference, or reduce their coverage, then they have few options besides pushing their highest-risk customers off of their rolls.

If your insurance company won’t take you back, you can shop around for alternatives. Many states have also set up public companies to provide coverage. They’re intended to be insurers of last resort, offering much more expensive policies that cover less. But in states like Florida, they’ve become the biggest property insurer, and even they’re struggling to stay solvent.

If you’re in a state where even some of the second-rate prospects are disappearing, there are also some emerging alternatives to the traditional model. One is parametric insurance, which can quickly disburse money to people hit by a specific predefined disaster like a wildfire or a wind storm.

Unlike traditional indemnity insurance policies that pay out with the scale of a loss, parametric insurance pays a fixed amount regardless of the damages. You don’t submit receipts and an adjuster doesn’t come to look at your roof; instead, a homeowner can claim a fixed amount of money based on objective data around the disaster.

The upside is a quick payment that you can use as you see fit right after a bout of severe weather. The downside is that disaster damages can easily exceed the fixed payouts, so you’re on the hook for what’s left — which is why parametric policies don’t fulfill mortgage insurance requirements.

If you don’t get an insurance policy that satisfies your bank, the lender might take one out and make you pay for it. This is called forced-place insurance. It protects the bank’s stake in the mortgage, not your investment, and it’s usually more expensive than a policy that you could get on your own.

The unavoidable result with all of these measures is that you’ll end up paying more to protect your home and often get less. It’s the bleak reality of the current insurance landscape: If you can’t afford it, you’re on your own.

Solving insurance drama requires solving the underlying problems

The core issue with the US insurance crisis here is not with insurers or customers per se but the fact that, due to a number of factors, losses are mounting and overall risks are increasing.

“When you have more storms, more fires, more of any of those things that cause insurance companies to pay out, that increases the cost,” according to a CFPB spokesperson. “But on top of that, there’s also the effect of inflation and the fact that if you have a house, if it’s destroyed today, it’s more expensive to rebuild than it was five years ago.”

More people are moving to cities that are vulnerable to coastal flooding or regions prone to wildfires, so when the water rises and the flames creep closer, more property is in harm’s way. The value of many of these properties is growing too, creating a recipe for surging insured losses.

The insurance industry’s struggles are an unmistakable symptom of a warming planet, but the effects go far beyond whether you can afford a home to whether a place is livable at all. And while they may not experience the biggest financial losses, impoverished and historically marginalized communities stand to suffer the most enduring scars of a disaster.

“You can’t financially engineer your way out of very high risk levels; you have to just reduce the risk,” Kousky said.

That’s not something an individual can do on their own. Reducing climate risk demands global efforts to curb the emissions of greenhouse gasses as well as large-scale work to adapt to the shifts already underway. It requires actions on the part of governments and the largest companies in the world.

For an individual shopping for a home, the CFPB says it’s time to add climate risk to the list of factors influencing your decision on where to buy alongside school districts, recessed lighting, and granite countertops. Pay attention to flood zones and wildfire hazard maps.

It’s not a guarantee, but it might be the best way to reduce the chances that an insurance company will break your heart.

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