“We were very surprised by those numbers. That’s a lot of people without insurance and much higher than we expected,” LendingTree home insurance expert Rob Bhatt told The Epoch Times.
“While insurance has become very expensive and even more difficult to get in some locations, this is putting people just one disaster away from losing everything.”
Bhatt noted that for most Americans, their home is their largest investment; but in some areas, insurance costs have become so prohibitive that homeowners are simply forgoing it and hoping that Mother Nature will be kind.
“For some, it’s become a choice between keeping the lights on and feeding the family or paying the insurance bill. That’s a tough decision,” he said.
California’s recent deadly wildfires sent insurance premiums skyrocketing, while areas such as Florida, Louisiana, and Mississippi have been ravaged by devastating floods and Texas and the Midwest by windstorms.
New homeowners who are relying on a mortgage have no choice in the matter, as lenders will not close the deal without home insurance policies in place. But those who have paid off their homes, or inherited properties from parents or family, can decide to go without insurance, as some premiums have doubled, tripled, or even quadrupled over the past few years.
“Insurance is definitely a bigger cost to home ownership than it had been in the past,” Bhatt said.
“For the foreseeable future, it could make home ownership less affordable and accessible, but unfortunately, that’s the new reality.”
Bhatt also worries that excessive insurance costs could discourage potential new homeowners.
Nadia Evangelou, senior economist and director of Real Estate Research for the National Association of Realtors, told The Epoch Times that home insurance costs have risen by more than 50 percent over the past 10 years.
“We’ve seen about a 30 percent rise in overall consumer prices over the last 10 years, but insurance costs have been increasing faster than inflation,” she said.
Still, Evangelou is confident that even rising insurance costs won’t deter homeownership on a national level.
“Home sales increased in February, and we expect sales to further increase at the end of March,” she said. “I think it all depends on the area of the country and weather-related events that could adversely affect insurance costs.”
Bhatt added that many insurance companies have abandoned coverage of some regions that are continuously hit with wildfires, floods, or high winds from hurricanes or tornadoes.
“The fact is that many people living in these areas are not able to obtain home insurance, or if they are, the cost is so high, they simply can’t afford it,” he said.
Typically, flood insurance is offered separately as an addendum to standing home insurance policies. Lenders will often require flood insurance if the property is located within a flood zone.
Bhatt also noted that property values tend to stay stagnant in areas where insurance is unattainable.
“As a result, not many people will want to buy these homes, or if they do, they’ll often pay cash at a reduced cost,” he said.
While New Mexico is not typically in those affected areas, Bhatt speculates that this may be one reason the state ranks highest for uninsured homes.
“People may feel that they don’t need it, or they don’t understand how homeowners insurance can protect them from other things like fire or theft,” he said.
Despite the escalating home insurance costs across the country, Evangelou reported that homeowners spend an average of just 1.4 percent of their total income on insurance.
“Household incomes have been rising, which helps to offset the cost of insurance. That’s some good news for homeowners,” she said.
However, in high-risk areas such as California, Florida, Louisiana, Oklahoma, and Texas, incomes may not be keeping pace with rising home insurance costs, Evangelou said.
“In Miami, for example, some property owners are paying over $3,400 annually,” she said. “Ironically, both Florida and California continue to be strong markets for home sales. Yes, these areas are prone to severe weather conditions, but people are continuing to purchase properties there.”
For those living in high-risk areas who have been denied coverage, there is another alternative—the FAIR insurance plans, available now in 34 states and the District of Columbia.
FAIR Plan policies cover less than a standard home insurance policy and usually cost more. A FAIR home insurance plan is intended to be a last resort.
