The increasing frequency and intensity of catastrophic weather events are reshaping homeowners insurance in a profound way. From wildfires in California to Florida hurricanes, insurers are reassessing risks, which has far-reaching implications for policyholders nationwide. The recent January 2025 fires in Los Angeles are a stark reminder of how these events ripple through the insurance industry, affecting not just those in affected regions but also homeowners in states like Massachusetts and New Hampshire.
Who Is Impacted?
In the immediate aftermath of a disaster like the Los Angeles fires, those directly affected face immense challenges, including:
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Property Damage: Thousands of homes and businesses may be destroyed, leading to massive insurance claims. Initial estimates have ranged from $50-150 Billion in damages.
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Higher Premiums: Residents in high-risk areas often see steep increases in their homeowners’ insurance premiums, even if their property wasn’t impacted.
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Coverage: More worrisome is the ability to secure coverage at all. Or coverage for relevant risks (such as flood insurance). Not only is this a problem in the event of disaster, but it can make the house unsaleable if a mortgage is likely. You may also find that you have coverage today, but not tomorrow. It’s been common practice for insurers to non-renew existing policies. Sometimes due to pulling out of a state entirely, or after demanding improvements that may seem unreasonable (like replacing a 10-yr old roof that should have a 20-yr lifespan). Non-renewal can force homeowners to turn to state-run high-risk insurance pools.
However, the impact extends beyond just high-risk regions. Insurance companies often spread the financial burden of claims across their entire customer base. This means that policyholders in areas far from the disaster zone—including New England—may see premium increases as insurers adjust rates to account for growing climate-related risks.
Why Does This Affect Homeowners Nationwide?
The insurance industry operates on a national scale, pooling risks and premiums across large geographic areas. When catastrophic events occur, the costs are distributed through:
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Reinsurance Costs: Insurers purchase reinsurance to protect against massive losses. Catastrophic events drive up the cost of reinsurance, which is passed on to consumers everywhere.
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Rising Base Premiums: Insurers recalibrate risk models to account for the increasing likelihood of severe weather events, affecting premiums across the board.
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State-Level Rate Adjustments: Some states allow insurers to factor in out-of-state claims when setting rates, further broadening the impact.
Non-Renewal: States pulling out of high-risk areas can help keep premiums more reasonable for those in insurable areas.
How to Keep Homeowners Insurance Premiums Reasonable in Massachusetts and New Hampshire
While no one can control global weather patterns or the broader insurance market, there are proactive steps homeowners can take to manage their premiums:
1. Strengthen Your Home’s Resilience
Investing in home improvements that mitigate risk can lower premiums. Consider installing storm shutters or impact-resistant windows if living near the beach. Evaluate appropriate roofing materials (such as metal or architect shingles) to best suit your area. Upgrade to fire-resistant materials when and where possible. Install water sensors and automatic shut-off valve, like the Moen Flo.
2. Bundle Policies
This is the most advertised way to save money. Many insurers offer discounts for bundling homeowners, auto, and other types of insurance. Consolidating your policies can result in significant savings.
3. Maintain a Good Credit Score
Insurers sometimes use credit scores as a factor in determining premiums. It’s a banned practice in MA, but utilized in NH. Therefore, depending on your state, a higher credit score often translates to lower rates.
4. Shop around but keep loyalty benefits in mind
Insurance rates vary widely between companies. Periodically comparing quotes can help ensure you’re getting the best rate and coverage options. But keep in mind that a long-term relationship with an insurer can have it’s perks. Benefits like vanishing deductible, accident forgiveness, or retaining grandfathered coverages may be well worth staying.
5. Review and Adjust as needed
Avoid over-insuring or under-insuring your property by adjusting as needed. Opting for a higher deductible, paying premiums annually vs monthly, or dropping frill benefits that you could reasonably self insure may make sense.
6. Work with a local independent agent
Independent insurance agents often have access to both local and national insurers and can provide tailored recommendations based on your specific situation. By weighing these factors, you can choose an insurer that aligns with your insurance needs.
The Bigger Picture
By understanding the interconnectedness of climate events and insurance markets, homeowners in Massachusetts, New Hampshire, and beyond can make informed decisions to protect their properties and finances.
