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Extreme Weather Affects Insurance Rates

Recently, Hurricanes Harvey and 60 billion dollars’ worth of damage, respectively. We don’t live in Texas or Florida, so we don’t have to worry about our insurance rates… right?

Actually, that might not be true. Insurance companies are a business, like any other, and homeowner’s insurance rates might also increase.

Yes, that’s right. It’s not just your homeowner’s insurance rates that might be affected. Hurricanes and other natural disasters can damage automobiles, too, so it makes sense that payouts for auto insurance claims also increase drastically during these times.

You might be thinking, “but can they actually increase rates here in California, due to events in Florida or Texas?”

Well, not directly. Insurance companies can’t actually increase rates in another state due to these events. However, these companies might not desire to write as many new policies in other states in the year or two immediately following a large loss. This makes insurance policies in general, along with their rates, more competitive in all states.

But there’s no need to panic just yet. Insurance companies own about 1.3 trillion dollars in capital, to help cover these losses. And according to the American Insurance Association, it’s too early to know whether rates on homeowner’s or auto insurance policies will rise as a result of this year’s events. Companies rely upon many factors, including long-term meteorological models and therefore determine rates.

Part of the nature of insurance is to build up a surplus of funds to deal with natural disasters when they do occur. So, it is possible these losses do not exceed insurance companies’ ability to pay for claims. But do watch your insurance rates when it’s time to renew, and remember that you can always call us to compare rates. We might be able to locate a competitive policy with a more affordable premium.