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Millions of Americans face challenges in affording home insurance, a problem that is anticipated to worsen, a new report finds.
This year has witnessed an unprecedented surge in severe weather events, each causing over a billion dollars in damages and directly impacting homeowners' financial stability.
A recent report from the non-profit organization First Street Foundation highlights a concerning trend: Millions of homeowners across the country are struggling to find affordable insurance due to climate-driven severe weather, even if the homeowners haven't been directly affected by these events.
Released on Wednesday, the report says that over 39 million properties, or about 27% of all U.S. real estate, will face significant insurance cost hikes and reduced coverage.
While certain regions may experience minimal impact, others, such as California, Florida, and Louisiana — prone to wildfires, storms, and floods, respectively — anticipate substantial increases in insurance premiums, the report states.
"In total, there are huge numbers of properties at risk of rising insurance rates and non-renewals due to the growing risk of wildfires for nearly 5 million properties concentrated in the Western U.S., wind damage for around 27 million properties in high-risk coastal wind zones, and flooding for around 15 million properties across the U.S. not covered by FEMA flood zones," the report states.
The higher insurance costs also drive down the value of the properties, and homeowners under financial strain — especially those struggling to pay mortgages and other costs — face the highest risk.
According to the report, if the 27.1% of mortgages that are already under delinquency or facing bankruptcy (967,000 mortgages) were to fall under the "Climate Insurance Bubble," 704,000 of those homeowners would face even greater financial strain.
"Without the ability to insure properties in high risk areas with relatively affordable policies, homeowners will not be able to afford the cost of ownership associated with homes in those areas and property values will deflate, leading to a realization of the current climate-driven overvaluation in the market," the report stated.
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