What Severe Weather Means for Your Money and the Economy

Severe weather is impacting countries around the globe. And major weather-related events (think: heat waves, hurricanes, flooding) are happening more frequently. (Thanks, climate change.) The current forecast for how this affects your money and the economy = not great. Because severe weather can influence how much you pay for food, insurance, energy, and more. Here’s what you need to know.

How much does severe weather cost?

The National Oceanic and Atmospheric Administration (aka NOAA) estimates that severe weather events — including droughts, winter storms, wildfires, and flooding — have cost the US economy more than $2.3 trillion since 1980 (hint: when it first started keeping track).

In the last five years, NOAA estimates that there have been 89 severe weather events where damages exceeded $1 billion. Their total cost: $788.4 billion, or an average of $157.7 billion per year. That’s up from an average of about $92 billion a year of severe weather-related damages in the 2010s.

Yikes. Who’s paying for those damages? 

The government, insurance companies, and other aid agencies are covering the costs upfront. But ultimately, everyone is paying for it by paying more for everything. Here’s how: 

• Homeowner’s insurance is more expensive.For example: About 90% of FEMA flood insurance policyholders in Mississippi, Texas, and Florida are seeing flood insurance rates rise this year, according to analysis by Redfin. Hint: Flooding is now the largest natural peril in the US. And in California, where wildfires have destroyed more than 40,000 structures since 2017, it’s getting harder to find insurance coverage.Which leaves property owners more vulnerable in the event of a wildfire.And the financial damage isn’t limited to these states — or even the US. By one estimate, global property insurance premiums will rise by 5.3% annually through 2040 because of these events.

• Property values could go down. The occurrence of natural disasters could impact how much your home is worth. A flooding event, for example, can decrease home values by 18% to 25% by one estimate. Just being in an area that’s considered a floodplain decreases values by 1%-4%. 

• Inflation could get worse. If crops are destroyed by heat waves or flooding, that could make food more expensive.And oil refinery disruptions due to hurricane season could make fuel more expensive.

What do I do about all of this? 

A few ideas:

• Stay covered. Because having adequate insurance will help if you’re directly affected by a natural disaster. Since flooding has become one of the biggest natural disaster risks, adding flood insurance might be a good idea, depending on your location. Because it’s not a standard part of homeowners’ policies. Review what is and isn’t included by your policy, and add anything necessary for where you live.

• Have an emergency fund. Because insurance won’t cover everything. And almost everywhere in the US is at risk of natural disasters in one form or another.Experts recommend keeping three to six months' worth of living costs in an easy-to-access account for emergencies.

• Vote at the ballot box. Natural disasters and climate change are inextricably linked. So taking steps on your own to be more green could help a bit. But you can’t fix climate change alone. If natural disasters are worrying you, let your current reps in Washington know. And vote for candidates (in local and national elections alike) who align with your values. 

• Vote with your dollars. Another way you can advocate for addressing climate change is by supporting brands that are going green. And avoiding those that are going in the opposite direction. Oh, and consider investing sustainably to keep your dollars flowing towards causes you care about.

theSkimm

Natural disasters can affect everything from your home’s value to the price you pay for gas. To stay ahead of the costs, get proper insurance coverage, keep an emergency fund, and vote (both with your ballot and your wallet).