Climate change is scary for plenty of reasons — and for homeowners, one of those reasons is the increased risk of property damage and value loss as natural disasters pick up pace and intensity.
Worse still, last year, insurance companies began cutting homeowners coverage in higher-risk areas, like California (where wildfires run rampant) and Florida (where hurricanes flood hundreds of homes on a regular basis). Along with refusing to write new policies, companies like Allstate and State Farm have refused new applications from certain affected prospective customers.
That’s why Rep. Adam Schiff (D-Calif.) introduced a new federal bill earlier this month. Schiff and his supporters believe that the Incorporating National Support for Unprecedented Risks and Emergencies Act — the INSURE Act, for short — will help stabilize the home insurance market and get homeowners the coverage they need, even in the face of a changing climate.
How would the INSURE Act help homeowners?
The proposed act suggests a federal reinsurance program that would require participating insurers to provide natural disaster coverage — and also invest in risk mitigation and loss prevention strategies that can help customers be more prepared for such events, according to a release from Rep. Schiff's office.
Furthermore, under the new legislation, the Office of Financial Research and the Federal Insurance Office would improve market monitoring techniques, working alongside state-level insurance regulators to do so.
Schiff calls the proposed bill "a critical step forward in the effort to ensure homeowners and communities have access to affordable and accessible coverage." But opponents worry about the efficacy of introducing federal-level solutions to problems in a state-regulated industry — and the effect such a program will have on the price of insurance to policyholders.
Nat Wienecke, senior vice president of federal government relations for the American Property Casualty Insurance Association (APCIA), told Business Insurance magazine that such a move "should be carefully considered, as evidenced by the fact that federal taxpayers are currently at risk from $20.525 billion debt already owed by the National Flood Insurance Program."
Unlike auto insurance, homeowners insurance isn’t legally required in any U.S. state — but access to coverage is still critical. Along with protecting the valuable assets of homeowners who’ve already built up equity in their property, homeowners insurance is required by most lenders, which makes it imperative for those would-be owners looking to finance their homes with a mortgage.
What can anxious homeowners do about decreasing coverage — and increasing rates?
Although its proponents are hopeful it would create positive changes for homeowners and insurance carriers alike, the INSURE Act remains only a proposition at this stage. It would need to pass votes in both the House and the Senate, and also acquire a Presidential signature to become law.
While insurance abandonment is in no way convenient, it is, at least for now, a solvable problem for many homeowners — though its solutions can sometimes be expensive.
For starters, homeowners can shop around for coverage among other private insurers who may remain in their markets. And even those in markets where this isn’t happening can benefit, since the price of homeowners insurance is on the rise across the board.
The average cost of homeowners insurance in America stands at $126 per month ($1,516 annually), although specifics range significantly depending on your state of residence and other factors affecting your risk level to insurers.
Barring access to private insurance options, homeowners in vulnerable areas might also turn to state-mandated plans, or public insurance options of last resort, which are being erected in these states as private insurers see their way out. (Colorado, for instance, created such an entity last year.) Homeowners might also consider adjusting their level of coverage, which could leave them at higher risk — but also decrease the cost of insuring their homes.
Time will tell if the INSURE Act will help create more avenues for coverage access in risk-prone areas, but for now, many homeowners walk a delicate tightrope between affordability and peace of mind.