As the climate crisis intensifies, insurers will likely reshape where people live — leaving desperate homeowners in the lurch

• Private insurers are exiting high-risk states as destructive, climate-related events intensify.
• Private policies are increasingly expensive, forcing some homeowners to seek less-robust coverage.
• Some homeowners might flee these states altogether as protecting their property becomes untenable.

Nick was camping with friends when he got a text from his neighbor: The three-bedroom cabin in the woods he'd purchased as a second home had burned to the ground.

The cabin was decimated by a wildfire that ripped through 50,000 acres of California's Klamath National Forest, near the Oregon border, in just 36 hours. Named the McKinney Fire, the July blaze was the state's largest in 2022 and claimed four lives.

"It was surreal. I didn't understand," Nick, who asked Insider to withhold his last name because of legal action related to the fire, said. "The fire burned so hot and fast, everything was gone."

The cabin wasn't insured. Nick chose to forgo it because after buying the property in 2019 for $100,000, he struggled to find an affordable policy — a growing problem. The only option Nick said he could find was the state-backed California FAIR Plan, which would cost $5,000, eating up six months' worth of rental income, and it wouldn't even offer full coverage — barely worth it. 

He had always thought the cabin might be fine. Previous fires hadn't come close to his neighborhood, nor were they as fast or powerful as the McKinney destruction. Now, however, his home was gone, and he was out $100,000.  

Nick's dilemma illustrates how the climate crisis is touching even the most mundane aspects of owning a home. More frequent and destructive wildfires, hurricanes, and flooding are pushing up the price of property insurance in high-risk states such as California and Florida; some companies are pulling out of these markets altogether. Surging policy costs and coverage deserts in already pricey markets mean insurers could become gatekeepers determining where people find it possible to live.

Expensive disasters, rising premiums 

Homeowners insurance is becoming more expensive nationwide, with the average premium jumping 11% this year to $1,700, according to the Insurance Information Institute. Florida residents pay much more: $6,000 a year on average, doubling over the past three years. The trade group forecast that the state's property-insurance rates could surge by 40% or more this year.

California, by contrast, has among the lowest costs in the country, at an average of $1,300. That's been stagnant because of strict state regulations on what insurance companies can charge. Companies can't price policies based on climate risks or pass along the cost of reinsurance to customers. Insurers buy reinsurance to transfer some of their risk and increase capital to sell more coverage.

Those limits are partly why some companies have left the state. In May, State Farm announced it would stop accepting new applications from home and business owners in California, citing the growing risks of natural disasters, a historic increase in construction costs, and a challenging reinsurance market. Allstate announced in June that it had already made a similar move.

Meanwhile, in Florida, some two dozen private companies have declared insolvency, stopped issuing policies, or withdrawn from the state since February 2022. The Insurance Information Institute said the main cause was high levels of litigation that saddle Florida insurers with legal costs, combined with billions of dollars in losses from Hurricane Ian and other storms in recent years.

A dozen denials and unreturned phone calls

Madelyn Rodriguez bought a townhouse 10 miles west of Fort Lauderdale, Florida, nearly a decade ago. Between 2019 and 2022, her annual property-insurance costs rose from about $1,400 to nearly $2,200, according to documents shared with Insider.

She's one of many homeowners who for years have bought policies from companies that aren't approved by Florida's insurance regulators. Rodriguez said approved companies in the state either wouldn't provide a quote for her property or would charge what she saw as exorbitant premiums.

Approved companies have to abide by Florida regulations regarding what they can charge and the risks they can cover, so the policies typically cost more. But homeowners who buy these policies are protected if they file a claim and then their insurer goes under, getting reimbursed by a state-backed agency.

Rodriguez, an insurance attorney, said she had no choice but to work with an unapproved company. Then, this year, the company dropped her policy with no explanation, she said.

She went hunting for a new insurer but was denied by at least a dozen private companies. She even kept a spreadsheet to track her various attempts to find coverage. Several didn't cover any properties in Broward County, where Rodriguez lives, while others said her property didn't meet their guidelines for what they insured. Three quotes she did receive were between about $3,800 and $5,700 annually — more than Rodriguez wanted to pay.

Her townhome hasn't been damaged by extreme weather, though other properties and businesses across Broward County have suffered losses this year from heavy rainfall and flooding, as well as from Hurricane Ian last year. Rodriguez's townhome also has a flat roof, which she acknowledged insurers were wary of because such structures are more likely to leak.

Ultimately, Rodriguez went with another unapproved policy, which cost about $2,600 a year. 

"My townhouse was my entry-level home," Rodriguez said. "So first-time buyers are going to be the most affected because they may not have enough money to pay for these insane premiums."

Living in high-risk states can feel like 'being on the Titanic' 

Similarly, Bob Stephens, an 84-year-old vacation-rental owner, said it "borders on impossible" to find insurance for his three income-producing properties in Marathon, Florida, which is on the chain of islands that make up the Florida Keys. 

"I spent weeks calling every insurance company in town, and only half of them returned my phone call," Stephens, a retired investor, told Insider. "It's just hopeless." 

For the $3 million property he and his partner purchased in 2021 — where they live in a detached 1,400-square-foot garage — it's an ongoing battle to find proper coverage. Houses that would cost $1 million or more to rebuild are not covered by the state-backed Citizens Property Insurance, leaving them vulnerable to a disaster. 

Stephens has no plans to leave Marathon. At his age, he said, he enjoys working in the vacation-rental business and, more importantly, loves the lifestyle in Marathon too much to leave. He has no interest in abandoning his year-round, flip-flop lifestyle to shovel snow.

However, Stephens is aware of the threats looming over his houses. He said he thought the Keys would be "close to underwater" in 30 to 40 years.

"It's like being on the Titanic," he told Insider. "You know you're going down. How are you going to stop it?"

'We never thought the fires could be this frequent and this bad'

Growing up in 1990s California, Nick remembers friends and neighbors treating disasters almost like a regional joke. A local store sold a T-shirt that read: "The Los Angeles Triathlon: Fires, Mudslides, and Earthquakes." 

No one could picture "the entire forest burning down," he said, adding: "We never thought the fires could be this frequent and this bad."

Nick once thought he'd retire in the 1,000-square-foot cabin he lost to the fire. Now he's not sure whether he — or anyone — will ever get the chance to live in his former neighborhood again.  

"There was a post office; it was leveled. There was a community center; it was leveled," he said. "I don't know that it's going to be rebuilt." 

As the calculus of insurance premiums changes where people live, Nick worries about how many California towns, especially the small, rural ones, might be wiped out completely by a natural disaster and never recover.

"Is that community just gone forever?" he said.