The Impact of Climate Change on Homeowner’s Insurance

As reported by CBS News’ Elijah Westbrook, the homeowner’s insurance market is experiencing significant changes due to the effects of climate change. Increased frequency of natural disasters like heavy rain and flooding is leading to a steep rise in insurance premiums. For instance, in New Jersey’s Ocean County and Suffolk County, Long Island, many homes are at high risk of facing increased premiums or losing their coverage entirely.

Understanding Policy Changes and Coverage Limitations

Public adjuster Vince Perry highlights the importance of homeowners understanding their policy’s coverage. Insurance companies are increasingly adding exclusions for certain events, with some policies only covering the depreciated value of damaged property. This shift necessitates homeowners to be vigilant about their policy terms to avoid being underinsured.

The Emerging Challenge of Lender-Placed Insurance (LPI)

What is Lender-Placed Insurance?

Lender-Placed Insurance is an insurance policy taken out by lenders or mortgage servicers when a homeowner’s insurance lapses or is insufficient. While it protects the lender’s interest, it often comes at a higher cost and with less coverage for the homeowner.

The Impact of LPI on Homeowners

With the rising costs and narrowing coverage of standard homeowner’s insurance, the incidence of LPI is likely to increase. This can impose a financial burden on homeowners, as LPI premiums are typically higher and offer less protection, adding to the homeowner’s mortgage payments and increasing their financial risk.

Conclusion

The confluence of climbing homeowner’s insurance rates due to climate change and the potential increase in Lender-Placed Insurance presents a serious challenge. Homeowners must stay informed about their insurance policies and actively seek comprehensive and affordable coverage to protect themselves against financial strain and underinsurance risks. Proactivity in insurance matters is essential in the current climate-influenced insurance landscape.