The process of buying a home always includes an analysis of location, price, and condition, but there’s another factor to consider that shapes your real estate decisions. That is climate risk. Whether you’re looking to buy a home in Tampa, where there’s a 63 percent chance of a building flooding, or Los Angeles, where fire season can cause significant damage, natural disasters can impact property values, insurance availability, and the total cost of homeownership.
This Redfin article explores why insurance has become the “third pillar of affordability” and details the due diligence needed to purchase a home with confidence in today’s evolving, climate-challenged market.
>> For additional information, see Redfin’s Climate Change and Housing Market Guide.
Homeowners insurance coverage and what is considered supplemental insurance.
A standard homeowners insurance policy, commonly referred to as HO3, provides core financial protection for your home, personal property, and liability. HO3 policies often cover common perils such as fire and theft. However, standard policies inherently exclude major natural disasters, such as floods, earthquakes, and damage caused by certain ground movements. For buyers in areas susceptible to climate change, it’s important to review these exclusions and secure alternative policies to fill gaps in coverage.
If your property is located in a flood-prone area, standard home insurance will not cover flood damage and you will need to purchase specialized flood insurance through the FEMA-administered NFIP or a private insurance company. Buyers should view these add-ons as an integral part of the total cost of homeownership, rather than as an optional cost to protect the property from evolving hazards specific to the local market.
Insurance: the third pillar of affordability
For years, homebuyers have primarily focused on two factors that determine the affordability of real estate: purchase price and interest rate. In a market increasingly exposed to natural disasters, the cost and availability of homeowners insurance has become a third important factor.
Considering the wildfires that hit Los Angeles in 2025, Cal Matters reports that “four out of 10 policyholders have experienced problems with their insurance, including significant increases in premiums and reductions in coverage.”
According to Pierre A. Louis, senior managing attorney at Louis Law Group, insurance is now the “third leg of affordability.” Buyers should treat the underwriting process as a parallel pursuit of due diligence and not as an afterthought to be sorted out after the inspection period is over. He added: “Flood zone designations, wildfire fire scores, and wind mitigation ratings can change annual premiums by thousands of dollars, so be sure to check before waiving your contingency coverage.”
Order disclosure of natural disasters to avoid unexpected situations
To proceed with a purchase with confidence, buyers should seek full transparency regarding a property’s environmental exposures. Floods, fires, and other evolving risks are not purely environmental. They directly impact your home’s insurance, long-term costs, and overall market value.
Heather Ruggles, director of operations at SnapNHD, says understanding real estate exposure upfront can help buyers avoid surprises and make informed investment choices. She recommends ordering a Natural Hazard Disclosure (NHD) at the time of listing. This proactive step “gives agents and sellers an opportunity to address concerns before the deal falls through.”
Prioritize quality insurance plans
When faced with high premiums in climate-sensitive regions, the temptation to choose low-cost airlines is strong. But low-cost coverage often comes with hidden financial risks.
LAWFTY CEO Todd Richheimer cautions buyers to look beyond premium pricing. “Many low-cost airlines are slow to pay and can easily underpay,” he says, adding, “We recommend asking your insurance broker to evaluate not just your premiums, but also the airline’s quality and claims reputation, because the true cost of insurance is only revealed when you actually need it.” By prioritizing reliable carriers, your biggest financial assets are better protected in the event of a disaster.
When purchasing homeowners insurance, be sure to consider plans that cover disasters such as fire and flood. In some cases, damages may not be covered and could result in significant future expenses.
Stay insured by investing in home resilience
As a buyer, you shouldn’t let the risk of natural disasters deter you from purchasing a home in your favorite area. Los Angeles homes still offer stunning views and the Hawaiian atmosphere is unparalleled. But Stand Insurance CEO Dan Preston says the most important decision is whether it’s worth paying to protect the home you’re buying.
When it comes to natural disasters such as fire, Dunn explains how a home hardened home (with fire-resistant materials) can make a home safer, saying, “It makes it meaningfully safer and insurable at a price that won’t force you to be evicted. Homeowners who invest in resilience are protecting both their families and their largest financial asset.”
Climate risk impacts long-term value
A property’s vulnerability to natural disasters has a fundamental impact on its long-term financial performance. Higher premiums, limited coverage options, and mandated abatements directly impact the overall value of your insurance premium.
Projections predict that climate change will reduce U.S. home values by $1.47 trillion by 2055. Homes that do not meet modern resilience standards or are located in areas where the climate is predicted to worsen may attract fewer potential buyers and may effectively limit appreciation in value.
By proactively addressing climate risks through up-front disclosure, securing high-quality insurance, and investing in physical resilience, buyers can not only protect their current assets, but also protect their assets. They strategically protect their appeal and long-term resale value.
Final Steps for Smart and Covered Buyers
Today’s homebuyers need to incorporate climate risk assessments into their overall purchasing strategy. We proactively investigate real estate exposures, prioritize carriers based on reputation and claims history, and view home resiliency as a financial asset. Treating insurance and risk mitigation as fundamental elements of affordability and due diligence will help you buy wisely and ensure your investment is covered for years to come.
>> You may also be interested in: After a major disaster, homebuyers are more likely to click on climate risk data – but the urgency is temporary
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