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Australian homeowners having a hard time to manage insurance coverage as environment dangers grow, report states

Home insurance coverage is becoming unaffordable for a growing number of Australian households as increased environment hazards increase their premiums, possibly putting billions of dollars in mortgage loans at risk, a report said on Monday.

Since March 2024, 15% of Australian households were experiencing home insurance coverage affordability stress, which is specified as having premiums that cost more than four weeks' of their incomes, the report from the Actuaries Institute found.

That is equivalent to 1.61 million households, compared to 1.24 million found to be dealing with cost stress a year ago -- an increase of 30%.

Increasing insurance expenses have sustained inflation in Australia and there are indications that some homeowners can no longer pay for to protect their homes due to climate-related threats and high construction costs.

Sadly, we expect this will continue due to the fact that of the general increasing threat of natural catastrophes associated with climate change, which will continue to put upward pressure on premiums, stated the report's lead author Sharanjit Paddam.

The report estimated that 5% of Australian households with mortgage were experiencing extreme pressures, with their insurance premiums averaging A$ 5,216 ($ 3,505) a year, more than double the average of A$ 2,124.

Those households facing the most severe affordability stress have about A$ 57 billion in outstanding mortgage loans as of March, representing 3% of all home loan possessions, it said.

If their home is damaged by a natural disaster and they either do not have insurance or are underinsured, they could discover themselves in a stressful monetary circumstance, Paddam said.

So, this is potentially a problem that's bigger than simply insurance coverage. It's also a problem for lending institutions, regulators and federal governments.

The report approximated that due to heightened threats of floods and cyclones, half of homes in southwestern Queensland, the Northern Rivers area of New South Wales and regional Western Australia dealt with premiums that cost more than one month's earnings.

(source: Reuters)