Kristy Jiayi Xu received a surprise on New Year’s Eve. Her garage roof was leaking in the midst of a severe storm in San Francisco. The unexpected cost of keeping the place dry was caused by delays in hiring a contractor to fix it.
“My husband, and I, are both East Coast natives, so we believe that the rain here only lasts for a few days,” says Xu. He is a certified financial planner and CEO at Global Wealth Harbor.
She and her husband were confronted with a heatwave in September 2022.
She says, “We have air conditioning but the bill was so expensive.”
Over a decade of scientific research has shown that climate change is likely to increase extreme weather events. This trend could have a negative impact on your wallet.
Let’s break down the.
Additional policies and higher insurance deductibles
Storms are more likely to cause damage to your car or home. It can be difficult to get enough insurance for your home and other needs — but it is possible.
According to Amy Bach, executive director at United Policyholders (a non-profit that advocates for consumers of insurance), there is less competition among insurers in the areas most affected by climate change. This means that consumers will pay more for their insurance, and especially their deductibles. A deductible is the amount that you pay before your insurer covers any damages.
Some insurers offer home insurance policies that include separate hurricane deductibles in hurricane-prone areas. Bach says that insurers are constantly changing their policy language to limit the amount they pay.
In an email, Jeff Brewer, the American Property Casualty Insurance Association’s department vice president for public affairs, stated that climate change is contributing to rising insurance prices. However, pricing risks are what insurers can do. He said that legal system abuse, fraud, and regulatory interference are contributing factors to market instability in many states.
You’ll need extra insurance if you live in an area that is prone to flooding or earthquakes. Most homeowners and renters insurance policies do not cover damage caused by these disasters.
The hardest thing about this is that so many households are now on a tight budget. Bach states that it is difficult to tell people to purchase three different insurance policies.
Higher food- and energy costs
Extreme weather has become more common, which can impact crop production and household energy consumption. This could mean that your grocery and energy costs may rise.
“Higher temperatures have played an increasingly nonnegligible part in driving price developments over the past decade,” according to a report 2021 by the European Central Bank. The report analyzed temperature data in 48 countries including the U.S. and looked at price indicators.
According to the National Energy Assistance Directors Association, home heating prices are expected to hit their highest point in 10 years this winter. NEADA also found that cooling costs have increased since last summer.
Indirect hits on investments
“Climate Change is Going to Impact the Long-Term Valuations of Both Stocks and Bonds,” Zach Stein, cofounder of Carbon Collective, an investment advisory firm that focuses on creating portfolios that combat climate change, said in an email.
Some industries’ performance may hurt your investment portfolio returns. Stein predicts that there will be the greatest volatility in the next decade in real estate, insurance, and agriculture.
Rising sea levels are likely to affect coastal real property. According to McKinsey’s 2020 report, Florida homes that are vulnerable to flooding could see their value drop by 15% to 35% by 2050.
What can you do now
Compare your home insurance options. Get quotes for multiple insurers. Bach suggests that you seek out independent agents or brokers if insurance is difficult to obtain. TrustedChoice.com is one option.
Your emergency fund should be expanded. Experts recommend putting aside at least three to six months of living expenses in an emergency savings account. CFP Xu suggests that you aim for a six-month figure, as disasters can cause more unexpected costs than job losses.
You should consider investing and banking that supports environmental causes. Only a few banks and credit unions can provide third-party certifications that prove their customers’ funds don’t support fossil fuel industries. Consider mutual funds and robo-advisors for investing that incorporate environmental, governance, and social factors.
You can “Storm-proof” your property. Reduce potential damage before the next major weather event. Make sure you have enough sandbags and gutter guards in case of flooding. Look into roof materials and vents that are fire resistant in the event of a wildfire. Cover windows with plywood and metal storm shutters in case of a hurricane.
NerdWallet wrote this article and it was first published by The Associated Press. This content is intended for informational and educational purposes only and does not constitute investment advice.
Spencer Tierney is a writer for NerdWallet. Email: [email protected] Twitter: @SpencerNerd.