The cost of homeowners insurance in the United States has exploded, up by 36% between 2003 and 2010 alone, outstripping inflation according to insurance analysts. Homeowners in some parts of the country have seen even greater rises due to the catastrophic weather events in their area. Citizens in Florida have seen their insurance premiums rise by over 90% in the same period, Rhode Island have seen a 62% increase and Louisiana a 58% increase.
The Tampa Tribune reports that one home owner saw their premiums rise from $1000 in 1996, to over $5000 in 2013. A substantial expense for retirees, who now face the prospect of not having insurance on their house and risking everything if an extreme weather event occurs and destroys their house.
Many consumers are being forced to accept higher deductibles just to afford the insurance. Meanwhile the Insurance companies are recording record profits, leading to some angry homeowners asking for more regulation of the industry. Some insurance companies also report greater profits in the areas with extreme weather events – so they make more money from Florida than they do from Ohio. The coastal states pay about $4 billion more than inland residents because of that extreme weather event risk.
The insurance companies suggest that the increases have been necessary because of increased risks associated with climate change weather events. With even more expensive hurricanes wreaking destruction this year, many householders fear that another round of dramatic increases in premiums may be on the way.
On top of that many households are seeing increases in the cost of premiums in the National Flood Insurance Program which many coastal property owners must buy. Their homeowners policy usually covers wind damage from hurricanes only, while the flood insurance is handled separately.
For real estate agents in coastal areas, the increasing insurance costs for coastal properties are a worrying sign, particularly when the market is still recovery mode. Hurricane Sandy caused a massive $19 billion in insurance costs, and we have to see what effect that will have on insurance premiums. If there is another large hurricane this season the 2014 premiums will be even worse.
Insurance agencies actually suggest that in previous years, properties in hurricane affected areas actually had premiums that were too low. This increase is just bringing premiums up to sustainable levels for the insurance companies. However the record breaking profits of many insurance companies tells a different story according to home owners.