Nowadays, not only is housing expensive in the United States, but even homeowners’ insurance is escalating! The reasons for the increase in premiums include inflation and the increasingly severe and frequent natural disasters. In May, the US National Oceanic and Atmospheric Administration (NOAA) predicted that hurricanes in the Atlantic this year would be more severe than in previous years. Under the threat of extreme weather, it seems that no state is absolutely safe. Today, from the perspective of homeowners’ insurance, I will explore the issue of housing risks across the United States.
According to NOAA data, from 1980 to 2023, there were an average of 8.5 weather-related disasters causing property losses of one billion US dollars each year. However, in the last five years from 2019 to 2023, the average number skyrocketed to 20.4 events per year.
2023 set a record for destructive weather and climate events since 1980, with property losses amounting to 92.9 billion US dollars from 28 catastrophic weather events, surpassing the 22 events recorded in 2020.
From the weather disaster map provided by NOAA for 2023, one can see catastrophic weather events including droughts, heatwaves, floods, hailstorms, tornadoes, hurricanes, wildfires, and winter storms. These weather events are more concentrated in the southern, midwestern, and eastern regions, with fewer occurrences in the western regions, which only saw one hailstorm and one flood in 2023.
By May 8, 2024, there have been seven weather disasters causing property losses totaling 1 billion US dollars, including five severe storms and two winter storm events.
During the last week of May, Texas experienced another tumultuous climate with a series of severe storms leading to at least eight fatalities and leaving around 500,000 people without power on May 29th and 30th. The losses from the storms are still being assessed, but the series of adverse weather is expected to result in losses in Texas reaching into the millions or even billions of dollars.
As residents in cities like Houston, Dallas, and Fort Worth in Texas rebuild their homes, many may be wondering about what to do next. Undoubtedly, many will file claims with insurance companies. However, with natural disasters seeming to become more frequent in the US in recent years and causing significant damages, insurance companies have been passing on costs to consumers by raising premiums. In some cases, insurers are even discontinuing new policy issuance in high-risk areas and only willing to renew existing policies, a situation becoming increasingly common in California.
Data from lending institution LendingTree shows that homeowners’ insurance rates have been continuously rising across the US, especially in storm-prone areas of Texas, with premiums increasing by 54.5% from 2019 to March 2024 in these regions.
In fact, according to analysis by financial services company NerdWallet, the average cost of homeowners’ insurance in Texas is $4,400 annually, or $367 per month. In comparison, the average annual homeowners’ insurance cost in the US is only $1,915, highlighting a significant disparity. In Houston, a city vulnerable to floods and hurricanes, the average insurance cost rises to $6,610! Relatively cheaper cities in Texas include Austin and El Paso near the Mexican border, with premiums averaging around $2,500.
Regional differences in insurance premiums are mainly influenced by natural disasters. Besides severe storms, Texas faces tornadoes, hailstorms, and wildfires, with the state experiencing rare blizzards in 2021 resulting in damages soaring to $129 billion and at least 48 fatalities.
The start of June marks the beginning of hurricane season in the US Southeast. However, this year’s weather forecasts raise concerns that it may be one of the worst years in history.
On May 23, the US National Oceanic and Atmospheric Administration warned in its 2024 hurricane season report that the Atlantic temperatures were warmer than usual, a trend usually seen in August each year. The agency estimates an 85% probability of an above-normal hurricane season, with projected 17 to 25 storms, 8 to 13 hurricanes, and 4 to 7 major hurricanes.
According to NOAA data, the cities most susceptible to hurricanes are Miami and Key West in Florida, each with a 16% annual chance of being hit. Cape Hatteras in North Carolina follows with a 15% probability, while Tampa in Florida and New Orleans in Louisiana stand at 11% odds.
Although Florida’s coastal geography makes it highly vulnerable to hurricanes, claiming three out of the top five hurricane-risk areas, it remains a popular relocation destination. In 2023, four out of the five fastest-growing cities in the US were in Florida, likely drawn by its beautiful coastal landscapes despite the risks associated.
For those concerned about hurricanes, real estate agents recommend moving to Central or Northeast Florida, including areas like Orlando, Leesburg, Kissimmee, and Lake City, which provide relatively safer options. Nevertheless, Florida remains susceptible to hurricanes in almost all its regions.
This explains why homeowners’ insurance costs in Florida are high. NerdWallet analysis shows the average annual homeowners’ insurance cost in Florida is $2,625, 37% higher than the national average of $1,915, and this figure continues to rise, making it increasingly difficult for Florida homeowners to find insurance.
Insurance costs vary significantly across different areas in Florida. For instance, in Miami, the average yearly homeowners’ insurance cost is $5,315, while Gainesville in North Central Florida offers one of the lowest averages at $1,675.
Moving on to California, the state with a large population of Chinese residents. California is considered affordable in terms of homeowners’ insurance, thanks to its mostly good weather conditions. The average insurance premium in California is only $1,250 annually, with major cities like Los Angeles averaging $1,485, San Diego at $1,205, and San Jose at $1,055, offering some of the lowest rates among major cities.
However, California’s homeowners’ insurance has faced challenges in recent years as wildfires have expanded annually, leading some major insurers to stop accepting new policies last year. For example, Farmers began capping new policies in California in July, Allstate halted new policy sales but continued renewing existing ones, and State Farm announced it was ceasing new policy sales but would honor renewals for existing customers.
The withdrawal of these insurers prompted the California government to expand the CA FAIR California Fair Plan using government funds to assist homeowners who couldn’t find insurance companies willing to cover them. Additionally, homeowners in California should note that standard homeowners’ insurance does not cover wildfire, flooding, or earthquake damages and require additional coverage.
According to NerdWallet, the top five states with the cheapest homeowners’ insurance premiums are Hawaii at $515 annually, Delaware at $860, Vermont at $870, New Hampshire at $1,000, and Maine at $1,075.
While Hawaii offers the most affordable homeowners’ insurance in the US, it does not mean it is free from weather threats. Hawaii is prone to severe storms, hurricanes, and even experienced a significant wildfire event in August 2023. Standard homeowners’ insurance in Hawaii does not compensate for hurricane losses, potentially pushing premiums above $2,000 when including hurricane coverage. The state also faces threats from volcanoes and earthquakes, further impacting insurance costs.
Other affordable states like Delaware, Vermont, and Maine experience fewer natural disasters, contributing to their economic insurance prices.
On the flip side, the top five states with the highest homeowners’ insurance rates are Oklahoma at $5,495 annually, Texas at $4,400, Nebraska at $4,135, Colorado at $3,820, and Kansas at $3,570.
Oklahoma’s status as the most expensive state for insurance is directly related to its severe weather conditions, including wildfires, hailstorms, and numerous tornadoes. According to NOAA statistics, Texas, Kansas, and Oklahoma are the top three states with the most tornadoes, posing a prevalent threat across the southern and central western regions.
The discussed average insurance costs for homeowners are largely based on city and state averages, but the differences in insurance for properties of diverse values can vary significantly. For instance, for a $200,000 home, the average annual insurance cost is $1,420, rising to $1,915 for a $300,000 home and nearly $3,000 for a $500,000 home.
The age of a property also affects insurance costs, with homes constructed in 1955 averaging $1,910 annually compared to those built in 2023 averaging $1,130, alluding to the correlation between newer property constructions and higher property values.
According to Policy Genius’ analysis of over 17,000 policies from May 2022 to May 2023, the average US homeowners’ insurance premium increased by 21%. In the same period, average premiums in Florida for homeowners’ renewals rose by 35%, followed by Idaho at 31%, Colorado at 30%, South Dakota at 28%, and Louisiana, Texas, and Oklahoma at 27%.
For those seeking more affordable insurance costs, experts recommend comparing prices from different insurers or utilizing independent agents for multiple quotes. Adjusting deductible amounts can also help lower premiums, although homeowners must be prepared to pay more out-of-pocket at the time of claiming losses.
Furthermore, inquiring about insurance company discounts like bundling policies with auto insurance or installing safety devices for premium reductions can be advantageous. Upgrading properties to withstand storms and floods can also warrant discounts. Finally, maintaining a good credit score can significantly impact insurance premiums, though some states like California, Maryland, and Massachusetts prohibit the use of credit scores to determine insurance prices.
Today’s exploration of homeowners’ insurance ends here, with many more details awaiting homeowners to discover personally. Regardless, giving up on insurance could mean facing irreparable losses. ◇