How Climate Change Could Affect Homeowners Insurance
Buying a house is always about analyzing its location, price and condition, but there is another factor to consider that should determine your real estate decisions: climate risk. Whether you are looking buy a house in tampawhere buildings a 63% chance of floodingor you are exploring houses in Los AngelesWhile fire season can cause devastation, natural hazards impact property values, insurance availability and the overall cost of homeownership.
In this Redfin article, we explore why insurance has become the “third pillar of affordability” and describe the necessary due diligence required to buy a home with confidence in today’s evolving, climate-exposed market.
>> Discover Redfin’s Climate change and the housing market manual for additional information.
What your homeowners insurance covers and what can be considered an add-on
A standard homeowners insurance policy, also called a HO3provides basic financial protection for the home, personal assets and liability. An HO3 policy often covers common hazards such as fire and theft. However, standard policies inherently exclude major natural hazards, such as damage caused by floods, earthquakes and specific ground movements. For buyers in climate-sensitive regions, it is important to confirm these exclusions and purchase a separate policy to cover coverage gaps.
Like one The house is located in a flood-prone areaa special flood insurance policy, either through the NIVthat is administered by FEMA, or a private insurer, is required because standard home insurance does not cover flood damage. Buyers should view these extras as essential components of the overall cost of homeownership, rather than as optional expenses, to protect their property from the specific, evolving dangers of the local market.
Insurance: the third affordability pillar
For years, home buyers have focused primarily on two factors that determine the value of a home affordability: the purchase price and the interest rate. In markets increasingly exposed to natural hazards, the cost and availability of homeowners insurance has become a third critical factor.
Consider the 2025 wildfires that ravaged Los Angeles, Cal is important reports: “Four in ten policyholders have faced insurability issues, such as huge premium increases and reductions in coverage.”
According to Senior Manager Attorney Pierre A. Louis van Louis Lawyer Groupinsurance is now “the third leg of the affordability stool.” Buyers should view the insurance underwriting process as a parallel process of due diligence, not as an afterthought to be resolved after the inspection period ends. He adds: “Flood area designationsWildfire scores and wind mitigation ratings can increase annual premiums by thousands of dollars and must be confirmed before any contingency waivers are waived.”
Order a Natural Hazard Disclosure to avoid surprises
To make a purchase with confidence, buyers should strive for total transparency regarding a property’s environmental exposure. Floods, fires and other evolving risks are not merely environmental risks; they have a direct impact on a home’s insurability, long-term costs, and overall market value.
Director of Operations Heather Ruggles with SnapNHD notes that understanding real estate exposure in advance helps buyers avoid surprises and make informed investment choices. She recommends ordering a Natural Hazard Disclosure (NHD) at the time of installation. This proactive step ensures that “agents and sellers have the opportunity to address concerns before they become deal breakers.”
Prioritize quality insurance
If you are faced with high insurance premiums in a climate-sensitive region, the temptation is to choose a budget company. However, cheap coverage often comes with a hidden financial risk.
CEO Todd Richheimer of LAWFTY warns buyers to look beyond the premium price. He says:Many budget carriers are slow to pay claims and are quick to underpay,” and recommends “asking your insurance broker to review not only the premium, but also the quality of the carrier and the reputation of claims, because the true cost of insurance only becomes visible when you actually need it.” By prioritizing a reliable carrier, you ensure that your greatest financial asset is adequately protected when a disaster strikes.
When applying for homeowners insurance, make sure you research plans that cover disasters like fires or floods, sometimes damage may not be coveredwhich could result in significant costs in the future.
Investing in the resilience of the house maintains the insurance
As a buyer, don’t let the risk of natural disasters stop you from purchasing a home in an area you love. Homes in Los Angeles still offer beautiful sights and the atmosphere of Hawaii is unbeatable. But Dan Preston, CEO of Stand insurance says the most crucial decision is whether it’s worth paying to protect the home you buy.
When it comes to natural disasters, such as fires, Dan discusses how a hardscaping home (which uses fire-resistant materials) can make your home “meaningfully safer, and keep it insurable at prices that won’t force you to leave. Homeowners who invest in resiliency protect both their families and their greatest financial asset.”
Climate risk affects long-term value
A property’s vulnerability to natural hazards has a fundamental impact on its long-term financial performance. Rising insurance premiums, limited coverage options and mandatory mitigation efforts directly impact its overall value.
Predictions estimate that by 2055, the U.S the home value will decrease by $1.47 trillion due to climate change. Properties that do not meet modern resiliency standards or are located in areas with worsening climate projections may face a reduced pool of prospective buyers, effectively limiting appreciation.
By proactively addressing climate risks, through upfront disclosure, purchasing high-quality insurance, and investing in physical resilience, buyers are not only protecting their current assets; they strategically monitor its attractiveness and long term sales value.
Final steps for smart, covered buyers
Today’s homebuyer must integrate climate risk assessment into their overall purchasing strategy. Be proactive in researching a property’s true exposure, prioritize carriers based on reputation and claims history, and consider the home’s resiliency as a financial asset. By viewing insurance and risk mitigation as fundamental components of affordability and due diligence, you can buy smart and ensure your investment is covered for years to come.
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