Summer Insurance Claims: Rate Adjustments Ahead Due to Weather-Related Incidents

As summer ushers in a surge of insurance claims, industry experts anticipate rate adjustments due to escalating repair costs by next year. The increase in claims is primarily driven by weather events, including wind, hail, and heavy rain. Flooding remains the most common disaster, yet many homeowners lack adequate coverage, as it requires a separate flood insurance policy.

Kaz Weida, an insurance expert with NerdWallet, emphasizes the accessibility of flood insurance beyond high-risk areas, stating, "You don't have to be in an area that's at severe risk of flood to get flood insurance either." Apart from weather-related claims, summer sees rising incidents such as pool and trampoline injuries and fire damage. Weida advises policyholders to ensure their policies cover recreational activities, highlighting the importance of protection while barbecuing or using fire pits.

Vacations present another risk factor, as leaving homes unoccupied can elevate the chances of incidents. Weida underscores the need to be aware of this exposure, noting, "A lot of us go on vacation. We might be leaving a home unoccupied for longer stretches of time."

Amid rising insurance costs, fueled by increasing materials and labor prices for repairs, rate hikes are on the horizon. Weida highlights the importance of evaluating coverage against these factors. Additionally, reduced FEMA mitigation programs, such as Building Resilient Infrastructure and Communities (BRIC) and the National Flood Insurance Program (NFIP), play a role in these trends. Leslie Kasperowicz, editor-in-chief at Insurance.com, notes that a lack of risk reduction initiatives prompts insurers to adjust rates accordingly.

BRIC and NFIP provide crucial resources for infrastructure enhancement and disaster response. Kasperowicz mentions, "When we don't have those programs working to reduce the risk, insurance companies then calculate that risk into their rates."

A recent NerdWallet survey reveals that 34% of homeowners experienced premium increases in the past year, with 46% expressing concern about rising costs. Kasperowicz cautions against cutting coverage to reduce premiums, which could result in underinsurance: "You get a quote and you think, 'Oh, this is a lot cheaper than what I was paying with my previous company.' But if you don't pay attention to the coverage that's providing, then you could end up underinsured."

Weida advises policyholders to consistently review their insurance plans to ensure sufficient protection against typical summer scenarios and determine if higher coverage levels are required. Homeowners with pools or trampolines should disclose these to their insurers, as undisclosed features could lead to claim denial if an incident occurs.