It’s hurricane season. Good luck getting affordable home insurance


June 1 marks the official start of the Atlantic Ocean hurricane season, and meteorologists predict it will be “extremely active,” with the potential for seven major hurricanes – the most destructive categories.

And as insurance companies struggle to stay afloat, hit by high inflation and the increasing frequency of catastrophic storms made worse by climate change, it’s becoming even harder for homeowners to find affordable insurance options.

Last year, rates jumped 11.3% nationally, according to S&P Global, and experts don’t expect a reprieve this year.

And while there are ways to try to save money on insurance costs, moving to a state with minimal hurricane risk won’t cut it anymore. States like Arizona, Illinois and Utah, which are not generally considered at risk from hurricanes, saw increases well above the national average last year.

For decades, homeowners insurance was considered a very stable line of business for insurance companies, said Chuck Nyce, a professor of risk management and insurance at Florida State University.

Most claims involved events affecting a single home, such as an electrical fire or washing machine leak.

But more recently, there has been an increase in catastrophic hurricanes, wildfires and convective storms – like severe thunderstorms and tornadoes, Nyce said.

Mario Tama/Getty Images/File

Samaritan’s Purse volunteers help a girl search for family heirlooms in the rubble of her mother’s wildfire-damaged home, Oct. 9, 2023, in Lahaina, Hawaii. Insured losses totaled $61.5 billion from fires and convective storms in Hawaii during the year, according to an estimate from management consulting firm Aon.

“These storms don’t just affect one property at a time. They affect a lot of properties,” he said. “It changes the dynamic for an insurance company.”

And unlike hurricanes and wildfires, severe convective storms hit states once considered relatively “safe” from most natural disasters, driving up insurance costs.

Last year was the worst year for the home insurance industry in more than a decade, according to a May report from S&P Global.

“Inflationary pressures, a devastating wildfire in Hawaii, and a record billion-dollar loss from convective storms weighed on the industry’s bottom line in 2023,” the report said.

The U.S. homeowners insurance industry saw net losses climb to $101.29 billion in 2023, according to the report. Only two of the 20 largest U.S. home insurance companies were profitable last year.

And today’s high inflation means that when property is damaged, repairs cost insurance companies much more than it did a few years ago, said Lynne McChristian, director of the Office of Risk Management and of insurance research at the University of Illinois at Urbana-Champagne.

“What many people don’t realize is that the amount you pay for property insurance is based on the cost of rebuilding your home, not the property value,” she said. “Understand that the price you pay for insurance is sending you a signal.” The higher the premiums, the more likely the area you live in is at risk, she said.

As insurance companies struggle to make a profit, policyholders also lose out. Some are subject to rate increases, while others lose coverage altogether.

Florida and California have been particularly affected by this phenomenon. Many domestic losers have withdrawn property coverage in these states due to high risks of hurricanes and wildfires, respectively. But the problem is growing: States like Louisiana, North Carolina and Texas are also seeing losers headed for the exits.

Kaylee Greenlee Beal/Reuters

A house is damaged by a tree after a severe storm in Houston on May 18. Texas homeowners saw their insurance premiums increase more than 23% in 2023, according to S&P Global.

Although property insurance is not required by law, most lenders require it for mortgage holders. This may require many owners to carry mortgages go into overdrive if they are unexpectedly removed from their insurance.

Most states have what is called an “insurer of last resort,” which is an insurance provider backed by the state government and designed to fill coverage gaps in the private insurance market.

These state-backed insurance plans vary by state, but they can be expensive or offer less coverage, Nyce said.

Yet these government-backed insurance companies have grown in popularity as some homeowners run out of options. Last year, the Florida state-backed Citizens Property Insurance Corp. became the 10th biggest homeowner loser in the United States, S&P Global said.

For those who still have insurance options in their area but are concerned about rising costs, there are simple ways to reduce your insurance costs.

Nyce said it’s important to compare every two years to see if other companies are offering more competitive rates.

“Some insurance companies may be looking to expand their business in your area. They might be willing to sell something at a lower price to gain market share,” he said.

Raising your deductible, the amount a person must pay before your insurance kicks in, could also help lower premiums, if you can afford it, Nyce said.

But another way to protect yourself is to shell out money now to “harden” your home to avoid high insurance costs the next time disaster strikes. That may mean investing in ways to strengthen your home’s structure, like metal straps that secure your roof to the walls of the house and wind-resistant garage doors, said Aris Papadopoulos, who works at the Extreme Events Institute from Florida International University.

“We all like to have a pretty kitchen, pretty closets and pretty bathrooms, but before you do anything, make sure your house is sturdy,” he said.

Leave a Comment