Droughts and Home Insurance: Understanding the Potential Impact on Coverage

Climate change is a pressing issue that has already started to affect our lives in numerous ways. From extreme weather events to rising sea levels, the impact of climate change is widespread. Certain regions, such as the Southwest, have experienced increased drought severity and frequency over the past few decades. 

Homeowners can experience majorly adverse effects due to droughts, such as shortage of water, damage to crops, and a higher risk of wildfires. This increases homeowners insurance rates due to claim severity and impacts real estate prices in those areas.

Droughts: Extreme Weather Trends In the U.S. 

During a drought, water supplies in a particular region are severely limited due to abnormally low precipitation levels. This weather event can seriously affect whole ecosystems, agriculture, water resources, and society’s overall well-being. As a result of climate change, drought conditions have become more severe and frequent as precipitation patterns change, temperatures rise, and evaporation rates intensify.

The Southwest region of the United States, in particular, has experienced more extended drought periods due to climate change. These longer and more severe periods mean the water supply has been reduced, causing issues with farming, producing energy, and nature.

In western states, droughts are becoming more common and wildfire seasons are lengthening. In eastern states, extreme rainfall is becoming more common as a result of climate change — most notably in drought-prone areas. From 1980 to 2019, drought caused over 249.7 billion dollars in damages.

How It Impacts Home Insurance Rates 

Drought doesn’t only impact the lack of water. It can also impact home insurance rates due to an increase in claims from wildfires, foundation issues, and cracks in walls or ceilings due to shrinkage. Protecting your home from these issues may include keeping the soil wet around your home — which would be next to impossible when water is scarce. 

Because of the increase in claims due to drought, some homeowners insurance companies will increase rates or even stop offering insurance altogether. 

Rising Premium Costs and Deductibles 

Extreme weather events are becoming more frequent and severe due to climate change, which increases the cost of property damage claims for insurers. Many insurance companies are increasing the cost of insurance or no longer offering that type of insurance in areas prone to these weather events. The results for homeowners are: 

1. Increased Premiums: Many insurance companies are simply increasing premiums, especially for homeowners in high-risk areas. 
2. Higher Deductibles: Insurance companies are also increasing deductibles for homeowners, transferring a more significant share of risk and cost burden to homeowners. 
3. Non-Renewals or Reduced Coverage: A homeowner in a high-risk area may find their insurance policies non-renewed or experience an added exclusion that reduces the coverage. Homeowners may have difficulty finding alternative coverage or face gaps in their insurance coverage. For example, many California homeowners have been denied renewals of their insurance policies after devastating wildfires, some of which have been caused by drought.

How to Protect Your Home Against Drought Damage

Protecting your home from damage is possible by taking a number of steps. Use these strategies below, especially if you live in a high-risk area prone to drought.

Water-Efficient Landscaping:

• Plant water-saving and drought-tolerant vegetation.
• Maintain soil moisture by installing mulch or ground cover.
• Optimize irrigation by grouping together plants that require similar amounts of water.

Efficient Irrigation Systems:

• Use a smart irrigation system that adjusts water consumption based on soil and current weather.
• Reduce evaporation and runoff by using drip irrigation and soaker hoses.
• Frequently check your sprinklers for cracks or breaks that may be causing leaks.

Rainwater Harvesting:

• Install rain barrels or cisterns to collect rainwater that can be used to water gardens or plants. Recycling is also fantastic for the environment. 
• Ensure that downspouts are directed towards vegetation or porous surfaces to maximize water absorption.

Water-Saving Practices:

• Reduce the amount of water you use during showers, fix leaks quickly, and install efficient appliances in your house. 
• If you have a spring near you, collect water from there to use for cooking and drinking. 
• Collect and reuse greywater from your washing machine for landscaping purposes.

Insulation and Shade:

• Make sure your home is adequately insulated to resist heat transfer, reducing the need for a lot of energy to maintain a comfortable temperature.
• Plant some shade trees to keep your home cool and reduce solar consumption.

Efficient Plumbing Fixtures:

• Reduce water usage by installing low-flow toilets, shower heads, and faucets. These days water pressure is not compromised by using these types of plumbing fixtures. 
• Invest in water-efficient appliances, such as dishwashers and washing machines.

Homeowner Education:

• Ensure you are aware of local water restrictions and stay updated on drought conditions in your area. Some energy providers will also offer credit for being more efficient. 
• Involve family members in maintaining a water-conscious household by educating them about water-saving practices.