How Car Insurance Varies Depending on Your Climate (2023) – MarketWatch

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The effects of climate change are already visible. According to the United Nations’ World Meteorological Organization, many areas around the globe experienced drier than normal conditions in 2021.
In the United States, the Mississippi River is in a severe drought, leaving long stretches of riverbed completely dry. Hurricane Ian devastated Florida’s west coast in the fall, leveling entire towns. And at the very start of the snowy season, a blizzard in Buffalo, N.Y., may have broken state snowfall records.
With the increased severity of weather events comes an increased risk of property damage. This means that due to the effects of climate change, insurance companies can expect to see policyholders file a lot more claims.
So how will the auto insurance industry adjust to climate change? Stefan Kleinekoort, a trained mechanic and the founder of The Driver Adviser, believes consumers are likely to see new insurance products — as well as higher costs — as weather events worsen.
“Insurance companies may likely develop new coverages in response to the increasing frequency and severity of natural disasters,” Kleinekoort says. He adds that “insurers might shift some of their … costs onto consumers by raising rates for all auto insurance premiums.”
Michael Orefice, senior vice president of operations at SmartFinancial, doesn’t necessarily see car insurance companies developing new types of coverage, but he thinks deductibles will rise sharply.
“Californians, for instance, already pay a separate deductible for wildfires on their homeowners insurance policies,” he says.
“If states like California start to see increasing comprehensive claims for damaged cars caught in these fires, insurance companies may feel squeezed to their limits, and they may impose a separate and more costly deductible for wildfires.”
Put simply, the rapidly changing climate may make car insurance more expensive.
Even if providers don’t create new types of auto insurance coverage, the necessity of having more than liability coverage may soon stress consumers’ pockets.
In colder climates like Buffalo, climate change may result in more sudden blizzard conditions. Ice may stick around longer, making roadways slicker and accidents more frequent. Heavy snows can bring down tree branches or powerlines, causing significant damage to a vehicle.
When mixed with water, oxygen and the chemicals found on paved roads, the salt used in snow removal and deicing causes rust and corrosion. That rust can reach all the way into the engine block.
If the effects of climate change cause longer, harder winters, comprehensive and collision coverages may become more of a necessity — or eventually a requirement.
Comprehensive coverage pays for repairs that are needed because of non-collision damage. If, for instance, an ice storm causes a branch to fall on your car, you can file a claim under your comprehensive insurance policy to pay for the damage.
Collision car insurance policies may also become more necessary in colder areas. Heavy snow and ice accumulation make for slippery road conditions, which can lead to car accidents. If you’re deemed at fault for an accident, your liability insurance will pay for property damages and medical expenses associated with the other driver’s injuries. Collision insurance will cover damages to your vehicle regardless of who’s responsible for the wreck.
How climate change will affect warmer climates is a whole different story. The areas of desert in the West and Southwest will most likely suffer debilitating droughts. The effects of drought on auto insurance are a little harder to predict, though extremely high temperatures will be dangerous for drivers.
The more you have to run your air conditioning, the more likely it is that your car will overheat. This can lead to the engine seizing up and causing damage that’s beyond repair. Orefice warns that “pretty much every part of the car has to work harder because of heat,” so he recommends that drivers in warm climates keep up with maintenance and have roadside assistance coverage.
As the planet warms and droughts get more intense, wildfires have become much more frequent. Parts of the Mountain West, California and the Pacific Northwest — areas that usually have a fire season — have seen incredibly destructive fires that are harder to control. As climate change worsens these areas’ fires, drivers should be considering comprehensive insurance to cover repairs related to fire damage.
Gap insurance may also come in handy, as a wildfire can easily destroy a car. If you still owe money on your auto loan, the payout from a comprehensive insurance claim might not be enough to pay the loan off. A gap insurance policy can help cover the difference.
The Southeast and parts of the Midwest — areas of the country with more humid climates — will likely see an increase in storms. The East Coast’s hurricane season is already worsening, producing more frequent and deadlier storms. Derechos, powerful wind storms also known as inland hurricanes, have also become more common, especially in the Midwest.
Both hurricanes and derechos pose significant threats through flooding from torrential rain or storm surge. Like drivers in both colder and more arid environments, those on or around the Atlantic and Gulf Coasts should consider comprehensive coverage as climate change worsens.
A comprehensive policy won’t cover water damage from internal leaks or windows left open in a rainstorm, but it will cover damage from a flood.
Though it’s possible to prepare your car for extended cold periods and winter weather, flooding poses a more significant threat because a vehicle’s main electrical components aren’t waterproof. Orefice believes that in addition to insurance providers, automakers will have to take new steps to protect cars from the effects of climate change.
Beyond military-grade vehicles, like the Humvee, there really are no climate-proof vehicles,” he says. He predicts that “manufacturers will begin to design waterproof systems and switches in cars as floods intensify.”
If climate change is already here, how can we adapt? It may not be possible to fully climate-proof your vehicle, but there are ways to protect yourself and your car. Kleinekoort recommends making fuel efficiency a priority. 
“You can significantly contribute to reducing climate change by improving the performance and MPG of your vehicle,” he says.
In addition to increasing your vehicle’s fuel efficiency or purchasing a more environmentally friendly car, Kleinekoort recommends driving less frequently and for shorter distances.
As climate-related disasters worsen, both drivers and auto insurance providers will need to adapt. Drivers will likely have to accept that car insurance premiums will get more expensive as natural disasters occur more frequently. On the other hand, to keep car insurance rates as affordable as possible to retain customers, providers may create new products designed to protect drivers from localized weather events.
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