Homeownership can help households accumulate wealth and promote financial stability, particularly amid elevated inflation. But climate-fueled extreme weather events threaten to undermine households’ ability to maintain homeownership. Disasters such as flooding, tornadoes, and wildfires can severely damage a property, reduce its value, and increase the likelihood of mortgage default.

Homeowner’s insurance provides financial protection against physical damage to a property. As a result, it can help households and the property they own recover from catastrophic weather events.

Given rising climate risk, unpredictability of future warming, inflation, skyrocketing construction costs, and state rules about insurers’ ability to raise premiums, private-sector providers of homeowner’s insurance are raising premiums and suspending cover in some areas, notably California and Florida. Higher insurance premiums contribute to growing affordability concerns because of high home prices and interest rates. Policymakers can take several steps to ensure affordability of premiums amid greater risk of climate disaster.