How to protect your biggest investment from climate change



Myles Ma

Myles Ma

Senior Reporter

Myles Ma is a senior reporter at Policygenius, where he covers personal finance and insurance and writes the Easy Money newsletter. His expertise has been featured in The Washington Post, PBS, CNBC, CBS News, USA Today, HuffPost, Salon, Inc. Magazine, MarketWatch, and elsewhere.

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Buying a house is intimidating. You have to find the right neighborhood, navigate mortgages and negotiate with sellers. But home buyers also need to be aware of another risk, a group of scientists says: the rising ocean.

More than 300,000 homes along the coast will be at risk of chronic flooding by 2045, according to a report from the Union of Concerned Scientists, a science advocacy organization. That's within the life span of a 30-year-mortgage.

The UCS defines chronic flooding as occurring 26 or more times a year. The analysis combined property data from real estate company Zillow with sea level rise projections from the National Oceanic and Atmospheric Administration.

It's critical for homeowners and home buyers to educate themselves on these risks, said Shana Udvardy, a co-author of the analysis and climate resilience analyst for the UCS. A home is typically the biggest investment you make, but flooding could threaten it.

What homeowners & home buyers should know

Homeowners and buyers should all get a handle on potential flooding in your area. The Federal Emergency Management Agency provides flood maps, but they may be out of date and likely don't account for tidal flooding, Udvardy said. And they definitely won't include sea level rise.

The responsibility lies with home buyers to find out what the flood risk is in a given neighborhood, Udvardy said. Ask locals if they have trouble with flooding and find out if the neighborhood has any defenses against flooding like sea walls or tide gates.

Homeowners may want to consider elevating electrical equipment or their home itself, Udvardy said. They need to be aware of risks not only to their home, but to local areas like roads or schools that could affect their lives if they flood.

Home buyers and owners should keep an eye on nearby construction, said Lynne McChristian, a Florida-based consultant for the Insurance Information Institute.

"If you live in a community where there's a lot of construction, where they do things like 'pave paradise and put up a parking lot,' that changes the way heavy rains run off and are absorbed into the earth," McChristian said.

If an already flood-prone area sees a lot of development, it could be a sign it will get worse in the future, she said.

"It's also up to each state to enforce strict building codes in order to withstand some of these major weather events," said David Kodama, assistant vice president of research and policy analysis for the Property Casualty Insurers Association of America, a trade group.

Homeowners should review their existing homeowners insurance, Kodama said. They should also create a home inventory to help ensure the amount of insurance they've purchased is adequate. Make emergency plans for flooding, including evacuation routes and communication plans. Store your insurance policy somewhere safe and accessible. (We can help you compare homeowners insurance and flood insurance quotes, if you need more coverage or are looking for a new policy.)

Flood insurance

Homeowners insurance doesn't cover flood damage. Anyone who plans to live near the coast needs to ask their insurance agent about flood insurance, Udvardy said. Homes located in FEMA-designated high risk flood zones are required to have flood insurance if buyers take out a federally backed mortgage.

There's just one problem: The National Flood Insurance Program, which covers more than 5 billion properties, is in debt and is set to expire July 31. The program is in need of reform to keep it stable, but with just weeks left to renew it, comprehensive changes are unlikely, Udvardy said. Among the reforms the UCS is calling for are updated flood maps that reflect future sea rise.

The National Flood Insurance Program is typically the only option if you live in a high-risk flood zone, said McChristian. Private insurers generally consider flood damage uninsurable because of how widespread it is, McChristian said, but you may still be able to buy it in less risky areas.

You can lower the price of flood insurance by insuring only the structure of your house and not the content, and by taking measures to lower flood risk, like physically raising the house.

Should you run from the coasts?

Even if you raise your house to the sky, flooding can still impact you by damaging the community surrounding your home. When buying a home, think about how much risk you're willing to take on. The cost of your insurance will usually reflect that risk.

"The fact is, living in these scenic coastal areas is a risk and we really need to recognize that risk and be financially and mentally prepared to deal with it," McChristian said.

But moving inland isn't always a solution: The Midwest has its own disasters, from earthquakes to tornadoes to wildfires. It's important to recognize the risks wherever you live, McChristian said.

No one is fleeing to the Midwest just yet. The coasts remain attractive to home buyers, said Aaron Terrazas, senior economist for Zillow.

"Some communities, especially wealthier ones with the funds to do so, may be introducing barriers to help protect their homes," he said. "That's not as feasible for lower-income communities, but we haven't seen any migration yet."

In fact, Terrazas said, regions damaged by storms and flooding normally get rebuilt at even higher prices. (We covered this trend earlier this year.) But buyers will likely wise up as flooding becomes more frequent.

Anyone looking to own a home in near future should take flood risks seriously, McChristian said.

"Taking action now will give you financial peace of mind to be prepared for whatever the weather brings," she said.

Have other questions about mortgages? We prepared a basic primer on home loans.

Image: MivPiv

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