A home is one of the biggest investments you’ll ever make, emotionally and financially. So it’s critical that you protect that investment as much as possible — including against climate change.
One aspect of that is making sure you have the right insurance coverage for the home. An insurance policy won’t stop storm or wildfire damage, but having enough coverage can mean the difference between being able to repair and rebuild or suffering devastating losses.
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“Climate change has caused a big shift in weather patterns and what buyers should be aware of when purchasing a home,” said Ericka York, a senior loan officer in Lakewood, Colo., with Fairway Independent Mortgage Corporation (Fairway owns Home.com). “Abnormal droughts cause fires to burn larger and hotter, winds are blowing stronger, and floods are becoming more frequent. You may be required to have different types of coverage in areas that have never required them, due to these changes.”
Your lender will require that you have homeowners insurance before you close on your mortgage. However, you may want to purchase additional types of coverage based on where you live and what the climate risks are to your home.
Here are a few questions to consider when thinking about your climate change insurance priorities.
“The consistent insurance you should have is for any type of water damage on all levels of your home, including the basement,” said John Kolb, a Michigan-based vice president sales manager with Fairway.
Check your homeowners insurance policy to see what types of water damage are covered and where. But consider whether it’s in your interest to add a flood insurance policy as well.
If you live in a FEMA designated flood zone, your lender will require you to have flood insurance. However, you may want to take out a flood insurance policy even if it’s not required. Although flood risk is highest in coastal areas and near bodies of water, severe flooding happens all over the country, inland and in places that aren’t designated as flood risks by FEMA.
“It’s good to know how close you live to a flood zone and understand the topography of the land around you,” said Joe Pessolano, a Fairway branch sales manager in Garner, N.C.
Homeowners have been hit with serious flood damage even though they thought they were far enough from the coast to escape the worst of increasingly strong storms.
“Strong hurricanes can be destructive hundreds of miles inland and cause severe flooding,” Pessolano said. “When Hurricane Matthew hit the Carolinas, there were many [areas] that were displaced from flooding that had never flooded before.
Ideally, you’ll assess the climate risks in your area before you buy a home. But even if you’ve already made the purchase, it’s still worth taking stock because you can always add to your insurance coverage.
“Think weather events. What could be the most severe storm that could hit your house? A category 5 hurricane? A tornado? Flood?,” Pessolano said. “Don’t assume that you’re exempt from the risk of anything.”
If you live in an area prone to droughts or wildfires, talk to your insurance company about what types of damage are covered and for how much.
It’s also wise to assess your property for physical risk. Having trees and shrubs close to the house can increase your wildfire risk, as can gutters full of leaves, twigs, and other debris. Cutting back trees and shrubbery, and adding fire-resistant plants, shingles, and other elements can help reduce losses if a wildfire does occur.
Review your homeowners insurance policy so that you fully understand what types of damage are covered. Typically, storm damage, such as from wind and hail, is included. But read the terms carefully to know exactly what types of hazards you’re protected against.
You’ll also want to make sure that you have enough coverage for any potential losses. When you first buy a house and take out homeowner’s insurance, your policy is based on the home’s value and property condition.
But as you invest in the home, making repairs, renovating, and enhancing the property’s value, revisit your policy and talk to your insurer about increasing your coverage level as needed.
That’s also a good practice if you invest in valuables such as costly electronics, art, jewelry, or collectibles. These items are typically covered at 50-70% of the amount of insurance you have on the house. But if you’re purchasing high-value personal items, you may want to raise your coverage level, especially if there’s a high risk that they’ll be damaged in a storm, flood, or wildfire.
“There are many types of insurance that can help protect you outside of your traditional home insurance policy,” said Garett Seney, a Fairway mortgage advisor in South Boston. He suggested that homeowners consider an umbrella policy, a type of liability insurance.
Umbrella policies on your home can provide additional coverage for injuries for which you’re considered liable. For instance, a guest gets hurt while staying at the home and needs hospital care and ongoing treatment.
Your homeowners insurance policy will likely include some liability coverage, but you may want to add to that, particularly if you’re in an area prone to dangerous storms or wildfires or you rent out the home as a vacation rental.
Climate change poses an evolving threat, and the coverage you need may change over time. York recommends talking with a knowledgeable, local insurance agent who can help you determine which types of coverage you need to protect your family and your home.