Why your home insurance policy might contain a costly climate risk trap
Homeowners in coastal communities in New England, such as Martha's Vineyard, are facing rising insurance premiums and dropped policies due to climate change. This crisis threatens the foundation of building wealth through homeownership, with potential cascading effects on the economy.
Insurers are deserting homeowners in Martha's Vineyard at high rates, comparable to hurricane-prone Florida and wildfire-ravaged California. New England has suffered over 40 disasters with losses exceeding $1 billion each in the last five years, mostly winter storms or severe storms. Climate change has fueled an unprecedented rise in costly disasters, making it a significant financial threat to insurers. Homeowners are facing rising premiums, with some seeing costs double in recent years. The stakes are high, as insurance is needed to take out loans for homeownership. High premiums put financial strain on households and can force people onto plans that cover less at a steeper cost. Senator Sheldon Whitehouse warns that the climate challenges to insurance could trigger a larger economic crisis. When properties become uninsurable, they become unmortgageable, reducing the value of the home. Data shows that insurers are dropping homeowners in Martha's Vineyard, Nantucket, and Cape Cod at high rates, among the highest in the country. Dukes County had the third highest nonrenewal rate in the US in 2023, with over one in 10 policies dropped.
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