Americans in disaster-prone areas are paying 82% more for home insurance than those in low-risk zip codes
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- Home insurance costs have soared for Americans in the most disaster-prone areas in recent years.
- Those in the most risky zip codes pay 82% higher premiums than those in low-risk areas, the Treasury said.
- More Americans are also increasingly faced with a lack of coverage, the department said.
Home insurance has become increasingly unaffordable—or even inaccessible—for Americans living in areas most vulnerable to climate disasters, according to a recent report from the US Treasury Department.
The report found that for those living in the top 20% of zip codes for expected annual climate-related losses, annual home insurance premiums averaged $2,321 between 2018 and 2022.
Those costs were 82% higher than for those living in the 20% lowest climate-risk zip codes, it said.
And the gap appears to only be widening as Americans in those areas increasingly fail to pay their premiums.
Insurers' cancellation rate due to nonpayment surged to 52% over the study's five-year period, putting the rate for high-risk zip codes' over double that of low-risk areas by 2022.
Compounding the issue is a seeming lack of available coverage from insurers as they choose not to renew plans for Americans living in areas with high exposure to climate events.
Over the five years, consumers in the highest-risk zip codes had an average non-renewal rate roughly 80% higher than those in the lowest risk areas, the report says.
To be sure, the data doesn't specify why insurers decided not to renew policies, or why homeowners decided to stop paying their premiums. Still, it's hard to ignore that the zip codes with the highest rates on both metrics tend to be in coastal, hurricane-prone areas like South Carolina's Hilton Head and Myrtle Beach.
With high costs and a lack of coverage, the data suggests that those already living in high-climate risk areas are only becoming more vulnerable to the financial fallout from natural disasters.
"This report identifies alarming trends of rising costs of insurance — to consumers and insurers themselves — as well as lack of availability of insurance, all of which threaten the long-term prosperity of American families," Treasury Secretary Janet Yellen said in a press release.
The report, which the Treasury said represents the most comprehensive data on the US home insurance market yet, was released on Thursday and comes amid raging wildfires in Los Angeles that are estimated to be the costliest in US history.
The fires are also expected to pose record insured losses, which has led to a sell-off for stocks like Allstate and Progressive.
"While it's far from clear what the exact financial costs of this disaster will be, it is a stark reminder of the impacts of the growing magnitude of natural disasters on the U.S. economy," Yellen said, adding severe storms in the Great Plains and hurricanes in the Southeast serve as further evidence.