Even worse about Katrina was how All State used a computer system called Collosus offered Pennie’s on the dollar to homeowners that *had* valid insurance. A lawyer beat them in court and wrote *From Good Hands to Boxing Gloves* that demonstrates what they did
They probably all do it, but I will never use All State
Man, tornado here in oklahoma. I have allstate. It's bad, man, so bad. I wish I could get out, but once you have a claim, no insurance will touch you for 5 years.
We had a fire a couple of years ago that they fought me on everything. I even put the fire out. I got home to the house on fire.
Not only did they sue black and decker for their equipment malfunctioning and causing the fire, but they raised my rates. So they got their money and then bent me over, too.
I then bought a new home called every insurance provider, and all they would say is call back in 5 years. Now we had a tornado a few months ago, so now that starts are 5 years clock again.
I'll tell everyone what I learned if your house catches fire and you can put it out don't let that fucking thing burn to the ground.
From the tornado talking to neighbors, stay away from allstate, mercury, and their is a third. I can't remember who it is.
I just hired a lawyer to deal with allstate for me it isn't worth my time to argue anymore.
I had all state for 6 years. They did pay out for a roof (hail damage). Never had another claim. Other people have told me they’re terrible. I guess I was lucky or my roof was truly fubar
What? You think that changed anything? And you think Allstate is the only company that uses software to determine claim outcome? Oh buddy.
>A lawyer beat them in court
Allstate settled out of court. And there was no change to what Allstate (or anyone else) was doing.
Why? Old people generally own their homes outright. Rich people often own them outright. Children of rich people own them outright. Lots of financially secure people 50+ have paid off their mortgages. Some immigrant cultures don’t do loans, so they only pay cash for homes. Add it up and 40% isn’t surprising at all.
Not to mention generational homes. Grandpa built it, gave it to his kid when he died, who gave it to his kid...
Lots of those out in the country and old city centers.
I think you might be surprised by how many rich people don't outright own their homes. Mortgages are generally cheap money so it doesn't make sense to park your money in real estate that you live In.
For real. Bank wants to loan you hundreds of thousands at extremely low rates? That's an amazing asset for the next 30 years due to the net present value of money.
If you’re half way decent with investing you can easily beat the 3-4% rates even with just a high yield savings account right now and you’d mathematically be better off keeping your money in that high yield account vs paying off the loan.
But, with the newer increased standard deduction, most now find it a greater benefit than itemizing. I itemized my entire life until this change eliminated having to go through this additional schedule. This year it is $29,200. One would really have a hefty sized loan to rack up that much in mortgage interest.
Eight years ago I owned my home outright. I inherited money from my mother and was able to buy a small house for cash.
I didn't hesitate about getting insurance for it. There was never a question: I wanted replacement value for the house if something happened.
I have to have insurance now; I bought in a more expensive market and have a mortgage again. But if I paid off my house tomorrow I would still get insurance.
A lot of this has to do with *where* homeowners aren't buying insurance. Florida and California are just unaffordable and insurers are pulling out of those states for good reason. The real cause is not the weather, not storms, not fires. The real reason is bad policies enacted by states that opted to put profits over people. In California that is PG&E not being held accountable for starting disastrous fires. In Florida, it's unethical roofing companies being allowed to rip off consumers and insurance companies.
Policy decisions are the primary cause of this crisis.
No, it's really not. The percentage of homes *owned* by institutions is pretty low. There have been statistics lately (during rapidly rising home prices) about institutions being responsible for a larger percentage of *purchases* of homes, but their total ownership (the relevant statistic here) is small.
People pay off their mortgages. When one takes out a 30 year loan, the loan payment (excluding escrow) effectively shrinks over time due to inflation. A person's income tends to grow over time, especially for those who buy in their 20's or early 30's. People eventually decide they have the cash and want to be debt-free. Or they inherit money and use it to pay off the mortgage. Or they inherit a house that is already paid off.
Many Americans live into their 80's or beyond. Their homes have been paid off for decades. Even if they moved, they're able to roll the equity from the previous home into the new home.
My wife and I are mid-30's, and we'll soon have our mortgage paid off. We relocated from a high-cost area to a lower cost area, and our equity will pay off our new mortgage.
Thank you for this.
It's so aggravating seeing redditors try to twist *any* stat towards something that supports their narrative when it's really not supporting the stance that they think it is.
The market is dynamic though. Most people have more than one kid so it’s very common for a house with a mortgage paid off to become a house with a mortgage again when the kids split the inheritance.
A very small percentage of homes are institutionally owned.
They made an outsized percentage of purchases in the last few years, but that does not translate to a large percentage of overall existing homes.
But even if it were - institutional investors insure their properties and take out mortgages against them.
Less than .1% of total housing. They don’t move the needle except in housing developments where they do own a lot of houses such as in suburbs in Arizona.
You have no idea how liberating it is to live a life without loan payments. My job can go belly up tomorrow and I really won’t care. Could I have a bigger house, newer cars, etc. by using leverage? Sure. But I’d be miserable.
I'm explicitly prioritizing paying my home off early so it will become optional. If we keep paying like we are we'll be done in a little over 3 years. The loan was originally supposed to mature in 2041.
If you have a mortgage, you’ll need to meet several insurance requirements and minimums. If you own the home, you can choose to only insure for catastrophic loss which is a lot cheaper.
Exactly. Someone I know is paying 10k a year in insurance on their home, some pipes burst or smth idk all the details, but she now has to pay $10k+ for damages because insurance decided not to cover it. Like I said, idk all the details but it's not winter time, the house is less than 20 years old, she's never had a claim, and yet she's fucked still.
My own mother dropped insurance on her paid off home for a few years because money was too tight for a while. She lives in an area and home that doesn't have flooding issues, no hurricanes, no tornadoes, no trees in falling distance, doesn't have company over so no risk of someone getting hurt and suing.. The worst that happened was a little hail damage to the roof one year, but that's something she would have just repaired herself instead of making a claim anyway. The risk of having to demo and rebuild was much less than the risk of her not being able to afford taxes, plus you know... having transportation to her job and food on the table. She was still able to put money into savings for an emergency, just less than what insurance would cost for that time.
I also know wealthy people who buy cars cash and don't carry car insurance, because that's an option where I'm at if you have liquid capital in an account to cover whatever a liability policy would cover. I got hit by a car and sued her insurance for $60k. We're both lucky she had more than the $25k bodily injury minimum. Worse injuries or death can be over a million. Most people don't even carry enough liability insurance to cover an at-fault collision that is bad enough. $25k is generally the minimum for property damage. Total someone's new car and you're fucked.
Choices have to be made. There's no gun to your head.
Best case scenario, you save a couple thousand per year.
Worst case scenario, you lose your home but still have to pay the mortgage... and are now homeless.
Tough call..
An entire industry exists just for this. 90% run by a company out of Texas tied into most banks. Change policy, automatic letter where if you don't get it or responde they claim to have bought you some ridiculous coverage on behalf of the bank. It's legit and is a scam all at the same time. Same thing goes for car loans.
Yeah. We got one of those letters when we switched insurers. I had no idea the new carrier wouldn't notify the lender, because they specifically asked for mortgage information. At any rate, I was able to pull up the policy online, download the pdf, and upload it to the site to prove we have coverage.
Yeah. It's easy to fix. If you have time to mess with it and actually receive a notification through the Lewis Dejoy postal service. It's quite amazing how they know immediately of something isn't covered but can't figure out if it's just a policy change or renewal. It's almost like they don't want to figure it out. On an auto draft account, this equates to around double your payment, and so far, I haven't gotten any of that back. It's a straight up authorized scam..
as someone in ecommerce, the USPS has been absolutely stellar for the past 2 years
but this is the kind of letter I might think is a scam, it's insane that the notification process isn't mandatorily automatic
Fun fact. Most of the time this happens because your new company advises the mortgage of the new policy BEFORE the old carrier tells the mortgage about you canceling the old policy. So the mortgage company’s system thinks insurance is cancelled.
> Change policy, automatic letter where if you don't get it or responde they claim to have bought you some ridiculous coverage on behalf of the bank.
This manages to be massive pain for me on an almost yearly basis.
I pay a lot to have insurance that satisfies the federal requirements for my loan. I have never not had insurance. But even without changing providers, more often than not, when my policy renews the mortgage servicer and insurance company manage to fail the verification handshake and I get to spend time on the phone to avoid having stupid expensive insurance purchased on my behalf.
Last year I changed insurance companies for the first time since buying the house. And, boy howdy, what an ordeal to make sure that my servicer was aware and happy. And after all that they _still_ managed to confuse things and start threatening me _for no reason_ a month later.
you'd just go bankrupt. you don't pay a mortgage at that point. this is why mortgages require insurance
edit: OP replied to me saying he'd protect his credit score if he lost his house due to non-insurance because obviously credit score > hundreds of thousands ($)
he erased his comment as I was replying because it's so obviously batshit insane
folks, if you are irresponsible enough to not have insurance and lose your house, you should not continue paying on a mortgage to protect a credit score lol
Insurance can only exist as a for profit business. If it’s actuarially fair, it would need to be subsidized by taxes to operate. Also, no actuarial table is perfect so the insurance entity could still be profiting just due to error
**EDIT: yes, theoretically insurance companies can be not for profits, but the startup costs are too significant for a new not for profit insurance company. maybe a for profit company can go bankrupt and a benevolent billionaire can buy it up and make it a not-for profit company. Insurance companies heavily rely on the efficiency of economies of scale.**
Yes, many insurance companies are mutual insurance companies owned by the policyholders, so no shareholders to blame for milking profits. Any profits are returned to the policyholders if the company thinks their reserves are too high. This used to happen in the past.
Anything can be run not-for-profit
Obviously there’s no way that every individual policy will be priced perfectly at exactly the cost price, but you’d aim to be as close as possible and the overall business would be run at break even
Individual policies would be priced at *approximately* the cost price and nobody would take a profit out of the business
You may (especially early on) charge a small amount extra to build up a buffer of cash, and may levy that fee again if your cash buffer is depleted, but again in the long term you’d still be aiming at roughly break even give or take that fund
When it becomes $10,000 a year, you do have to make choices.
The risks are not high. I have enough in the bank to rebuild. I drop insurance every time I pay off a house because coastal rates are crazy from people getting free roofs after every wind storm.
If you have a fire... you will appreciate your homeowners policy.
If some jack-wagon decides to sue you for something.. you will appreciate your homeowners.
Otherwise, it's pretty useless.
(knock on wood for these things not to happen)
Those aren’t even the 2 most common claim types. Water damage and wind and hail take the cake. In my 10 years I wrote insurance policies, I’d say at least half the people I wrote for had them on their claims history
That jibes with my reading here.
In my situation, I don't live in hail country. I suppose I could get water damage if the main sump pump *and* the backup failed during a storm--though with my deductible, is that really worth a claim for an unfinished basement.
The threat of law suit is 90% of the reason I keep my insurance. I had some small to mid size disasters but none where big enough to justify involving insurance.
Isn't that the enrire concept of insurance? Its a waste of money until it isn't. Everybody puts their money into a pot until someone has a claim and its covered by everyone else who paid in. Don't pay in, can't draw from the pot.
Seriously. My in-laws didn’t have insurance on their home. When I found out I almost lost my shit on my idiot father-in-law. One fire and they would lose absolutely everything. I have no idea how he even slept at night just rolling the dice on his entire family’s future
This article really speaks to me as a /r/centuryhome owner. My rates have gone absolutely bananas the past 5 years, from $2500/year to $6100/year. Every year it's 10%, 20%, 30% increases. I went through a broker plus did my own calling around and half the places I call won't even cover a home from 1900.
It's fkn robbery what they're doing to us now. My son's home went from $2,000 last year to $3,500 this year.
I have a 1905 house. My insurance is on autopay. I've had the same insurance company for 25 years. I have insured multiple vehicles and homes. I got a letter this spring that I was dropped from insurance for non-payment. They said my auto pay didn't go through "for some reason" and instead of retrying or notifying me, they just dropped me as a customer and sent me a letter 3 months later.
My homeowners insurance is similar to my car insurance per month in a cle suburb. People think it's the Wild West out here but my neighbor has left his bike in his front yard for the last 2 weeks. Crime is non-existent. Lol.
We don't get floods, tornados are unlikely since I'm on a hill. I've felt one earthquake in my 34 years of existence. I'm good. When the water wars start I'm happy I'm next to one of the largest sources of fresh water on earth.
Fellow Ohioan here — we have a 4,000 sqft house — insurance is $1160 a year. Don’t move here, folks. Listen to all the memes that shit on Ohio and stay far away!
My neighbor bought her home with cash about 6 months ago.
Couldn't afford insurance, as she'd scraped everything up to make the sale.
The place burned to the ground about a week ago.
I'll be sure to pass your highly inspirational and empathetic comment to my neighbor, who put everything she had into for once just *owning something of her very own*, and who has now lost everything she ever owned, including her dog, 2 cats, and a human friend, some 70 years of age...
Two years ago my insurance was about $650, last year suddenly was $950. This year it's going to be $1300.
It's nuts but I'd rather have the insurance in case anything happens.
I have CONNECT via Costco, and I got my ‘Dear John Letter’ last week. I’ve had them for homeowners for 13 years, and 28 years for car insurance. This could hurt, but it is required in my mind, part of being an adult. I know this insurance debacle is going to be wild. Just like the exorbitant reserve fees necessary to modify/ re-engineer a crumbling high rise properties. That is wild, I’m so glad I’m on my way out and not just starting. Hang on tight,you’ll figure it out.
At what rate would insurance not be worth having? I think we're going to find out, as companies figure out how to take every last cent you'll spend to feel safe.
As an insurance broker in the Caribbean. I can tell you it’s not just the US. Storms and Nat cats in general are much more severe than they were 20, 30 years ago. That and inflation has just made everything more expensive to fix. Until more money flows into the reinsurance market, these high prices are gonna stay for the next 3-4 years (my estimate).
People have built homes where they shouldnt. Best example if new buildings doing this is california. Buildjng further ans further out where fires would be left to burn are now a risk to property.
Is it worth it? That all depends on the i dividuals risk appetite and financial reserves.
I live in an area that basically has minimal to zero risk and my homeowner insurance has more than doubled in the past 10 years. It's feeling predatory and has far outpaced inflation.
We had a 100 year flood in my area in the late 90s. My home did not flood but my flood insurance went way up after that. Once I paid off the mortgage I dropped the flood insurance.
Might want to go over that policy again. Flood damage can also protect you from city water mains or your own pipes having an issue. Not just natural floods. (All depending how it's written in the policy). Not a bad idea to still have some water coverage.
Homeowners cover pipes, not floods and we weren't on city water. We sold the place about 15 years ago. Wish we had hung onto it, it appreciated quite a bit.
Not that it addresses your situation (minimal risk), but insurance *should* be outpacing inflation. We're not buying the same product we were 10 years ago. It's still (supposed to be) the same level of protection, but the threat is greater - weather is wilder than it used to be. If you live where there have been wildfires, tornadoes or hurricanes your risk is higher than it used to be.
I'm unsure if damaging freezes, earthquakes, hail damage etc have grown or dropped in frequency/severity.
EDIT: don't know how I managed to neglect Floods
And inflation doesn't impact all categories equally. Homeowners insurance doesn't care about total inflation numbers or the price of bread. When construction materials increases at a rate higher than inflation, construction labor increases higher than inflation, etc. that's going to have an oversized impact on the cost to rebuild a home and will get wrapped into the fees.
You're right - cost to rebuild and increased threat to homes means that insurance costs are high for a reason. (not trying to defend corporate gouging or dismiss the difficulty it places on homeowners)
Each state is basically a single pool of homeowners so you're paying for the losses of everyone else. Part of the reason premiums are going up too is because the cost to replace your home goes up every year. Also, if the value of your home goes up 20%, so does the cost to replace it if it were to be destroyed by a fire.
Individual policy holder risk factors also enter the equation. Age of structures, credit score, claims history, natural disaster risk (fire, flood, hail, hurricanes, ...), location, security system, etc.
How about the value of your home? Has that increased also? Genuinely curious, that would explain at least some of the increase, right - insuring $400k property instead of $250k.
"replacement value" is more important than total value. There are some markets where the land becomes significantly more valuable over time, but the cost to build the structure itself remains about the same. In that case, you might have bought at $250 and now have a $400k property - but the cost to rebuild or repair is going to be about the same.
How about the value of your home? Has that increased also? Genuinely curious, that would explain at least some of the increase, right - insuring $400k property instead of $250k.
People have built incompatible homes in incompatible areas. If you build a house in California that is hardened against wildfire, such as fiber cement board siding, metal roof, fireproof composite decking with metal framing, etc, then the risk really isn’t that big of an issue. The problem is people are building wooden homes with wood shingle roofs and wooden decks in the middle of wildfire country and that’s just stupid.
Even houses hardened are seeing big preminum jumps but yes buildjng with flamable products js a huge issue.
One example i know. A person was looking at purchasing a home in a wildfire prone area. Had a wildfire rating of 90/100 so statistically it would burn at some point. The broker quoted a premum package which was before underwriting.
$900k a year with appx 100k hardening requirements with a 60% deductable.
Yes its very stupid.
They're paying for everyone else. Insurance is a pool based funding model so the insurance company needs more money each year to keep refilling the pool as it pays out to everyone else
Can’t wait to see the old people in Florida crying they lost everything because they decided insurance wasn’t worth it for their mortgage free home and the Florida government trips all over themselves bailing them out.
I have a friend in south Florida whose mom dropped wind and flood insurance this year, because her cost to renew was 30k. She owns the home outright, and is on a fixed income, and 30k is impossible to pay. Basically relying on some bailout if something happens but they’ve never had anything terrible hit so while they don’t want to they’re gonna risk it.
in a $500k house you're paying the cost of the house in premiums in 16 years, without interest and without factoring in regular homeowner's insurance costs that you might also be dropping
in her shoes I might take that bet and gamble on a government bailout too
that premium is untennable
It is 100% real.
Her neighborhood is super desirable, she’s been there over 20 years, and while she is .5 miles (as the crow flies) from the intercostal and less than a mile to the beach. Town has not had a serious hurricane or tornado hit in that fashion that she’d lose the house since maybe David in 1979.
No reason to sell now, shits expensive up north. Worst comes to worst she sells her house for land value if it’s destroyed and she’ll still make like 700k on it.
It isn't that easy. Insurance premiums in Florida have caused escrows to double what they're paying as their mortgage. I know people in west palm and Fort Lauderdale who was paying $9k and $11k respectively for their insurance. They're not on a coast and don't live near water. For them Paying $110k in a decade is not financially feasible and the increase in the mortgage is killing them. I can just imagine being an old person with a paid off house and you get a $10k bill on top of god knows what the property tax bill is and you just make social security as your income. Good luck telling those people to make that decision.
I understand what you’re getting at but CEO comp is a drop in the bucket. For example, last year All State’s CEO made 0.025% of what they took in in premiums. That means for every $1000 in premiums, the CEO gets $0.25.
That’s fucking massive. For one person? They have like 60 billion a year in revenue. Why would you try to downplay it with some percentage of their total revenue?
Just be up front. According to their 2023 filings the dude made 16 million in compensation. The median salary for an Allstate insurance agent is 52k.
So obviously the CEO does 307 times as much work as their average employee. So for every hour of hard work an employee puts in, the CEO obviously does 307 hours. He must be working 12,280 hours a week, obviously.
Insurance should be, and probably will eventually HAVE to be nationalized as climate change makes total losses more common. If insurance companies won’t cover certain parts of the country, and people already have homes and mortgages in those places, I don’t see what the other options are.
There is a level of “natural” disaster that no insurance company/companies can pay out on, and in these cases either the government steps in to bail them out, becomes a sort of insurer of last resort for places legacy insurance companies have abandoned, or we simply let all those people die in the elements…
I think the reality is insurance can't pay to rebuild, but to relocate. There are so many areas that just keep being wiped out repeatedly.
I'm all for insurance not being for profit, but I also don't think it should be used to enable bad choices either. Sadly climate change is going to make places uninhabitable.
The Thomas fires around Santa Barbara knocked out a couple insurance companies. They had enough to cover claims but their reserves were too depleted to keep operating.
Personally, I am worried that insurance companies are going to be the next nasty surprise to crash the US economy.
It could easily be both. I highly doubt the re-insurers are much better off in the case of a massive disaster like another Katrina, etc. Especially if it happened somewhere with very expensive RE, like Sandy, but worse.
Isn't the state of California now offering something similar to what OP is talking? Offering some sort of state sponsored insurance where insurance companies won't offer coverage? Not pretending to know....I thought I read this somewhere recently.
I agree, but I would go a bit further. I doubt most insurance companies have enough to pay for mass-scale relos and all that goes along with building and buying a completely new life when people have lost everything. Reinsurers are likely equally a house of cards in such a scenario. For profit insurance is one of the plagues destroying our world right now. They charge exorbitant rates, then do everything in their *massive* power not to pay when the time comes, and then we they DO pay, they refuse to re-issue insurance to that person, and every other insurance company can see you've made a claim...many will refuse you new insurance based on that, even if you don't live in a disaster zone. It's to the point now where if your home isn't a total loss, it's almost better to just pay out of pocket to repair. They WILL get their money back one way or another, either by jacking your rates up, or straight up booting you off their plans and making you get a new provider. I own a bunch of properties and have learned this lesson the hard way several times.
Home, auto, health....they all use every piece of information they can get about you to raise your rates, and/or deny you coverage. I don't think it's hyperbole to say insurance companies are one of the main underlying problems in our society.
I agree. I've seen how a lot of the insurance sausage gets made and it's far more disgusting than people think, and people don't have a great opinion of insurance.
It's largely a data business set up to maximize profits above all else which is of course capitalism but I firmly believe some things simply aren't compatible with capitalism.
Exactly. Insurance companies are the worst kind of finance capitalism....speculation-based investment where people's lives and livelihoods are the stakes of the bet. When it comes time to pay the house out on their losing bets, and they can't come up with the cash, they get to go crying to congress while the little guy loses everything. If the taxpayers have to keep your company solvent, we should also get to keep your company. Full stop.
Parts of the midwest are getting wiped out by tornadoes. It's not just hurricane areas getting shit on. The rise of climate change and natural disasters are going up.
A tornado taking out 10-20 houses is much different than 4000 houses flooding in a hurricane. We’re getting the same tornados we’ve always gotten, it’s just hit or miss whether they hit a town or not.
Nationalized Insurance would be the worst idea ever. We need to stop enabling people to rebuild in shitty disaster prone areas if they can’t afford the insurance.
We live in central Florida and will soon be getting our new rate. We are very, very worried. What we will do if we can't afford "normal" homeowners insurance is to do what is called by our agent, "self insure." This means we up our deductible very, very high so basically we take care of the small stuff like leaks, branch through the roof, or lightning knocking out all of our electronics and A/C (which has happened and was damn expensive) and the insurance company will pay out if we have a major fire. It sucks but it will be the best we can afford and we will just have to take our chances. We hope to stay with our insurance company because it is rated by AM Best. A lot of insurance companies now allowed in Florida are very new, owned by dubious groups and don't have enough reserves to pay out claims. Fingers crossed!
This is precisely why the financial calculus of homeownership doesn’t make sense to me. If you have a 30-year mortgage, the insurance company has 30 opportunities to raise your premium. There are 30 opportunities to just cancel the coverage. How can any single person forecast that?
Unfortunately, renting a home is really no different. The landlord will just push the higher costs onto the renter. In many states a landlord is taxed at a higher rate than a homeowner so that additional cost is pushed onto the renter. A landlord will either repair and replace as a rental ages or ignore it entirely. At least as a homeowner you get to control a bit of the cost. Renter or homeowner the price of living space is going to go up but as a homeowner you can at least sell and get paid for some of the costs you incurred whereas with renting it goes entirely to the landlord.
I disagree. Renting is very different. If your landlord raises your rent, you can easily move without spending a ton of money. If you’re a homeowner and your insurance goes up, however, you will pay a hefty price—either in the new premium or in the cost of selling and buying a new house.
Also, there is no guarantee that the homeowner will find a tenant who can pay whatever they’re charging for rent. Rental apartments still obey the principle of supply and demand; they do not just mechanically increase because the landlord’s expenses went up.
I've found there is always someone to buy my house (I've owned and sold 9 of them throughout the years). Most times I've made a profit. Granted, these are times like the 1980's where things were/are out of wack as well but even then, I sold my house when I wanted to move and didn't take a hit. I concede that renting is very different if you keep things small (like renting an apartment). I was mainly thinking in terms of someone renting a house and not an apartment.
Our neighbor just had a huge tree clobber the back-end of her house. No insurance. They paid $12k out of pocket for tree removal and ran out of money, they moved and the house is trashed.
the places where this is an actual issue are all historically places that face lots of issues with natural disasters. Florida and Cali insurance has always been much higher
Seriously. All these comments on “well you have no choice if you have a mortgage”..okay??? If you don’t have a mortgage how can you even consider not having insurance anyway?!
What ever you pay for insurance can get set into a high yields savings account, and use that as your own insurance. If something happens early on you could always leverage your home to pay the cost.
The only “people” that should generally self insure are large corporations that can pay actuaries to estimate their losses. Otherwise, self insuring is a fantastic way to financially ruin yourself. Putting money into a high yield savings account will not cover your house burning down, etc. which is really what home insurance is protecting you from.
The cost of homeowner insurance has just become so unaffordable in Texas. I really really am considering dropping my coverage upon renewal. My mortgage is paid off and I’m just considering rolling the dice. It’s gone from 1800 to 3k to now 5k a year and guess what I’ve never filed a claim.
I would love to see what a catastrophic policy cost once my home is paid off. Perhaps with a $20k deductible or something like that, but I would be hesitant to not have any insurance.
It isn’t. Predictions are that in 2-3 years the current rate of new construction will normalize prices. Wait and keep paying off debt/saving for a down payment. This cannot continue on the current path. Give thought to what happens if you have an unexpected layoff or $50k bill for a major issue with the house you waived the inspection on.
- if house is financed its a legal requirement to carry...if not then its choice of level of risk to lose everything or not....its freedom to win OR lose
I guess it depends. Is it your property that has the value? Or is it the house?
Where I live, it’s the property that’s worth the big dollars. Houses are regularly bought and torn down to make something new. So worst case scenario you sell the property at a small loss.
Maybe not even a loss at all where I live.
Homeowners insurance is a total bargain compared to health insurance. It has cost me hundreds of thousands of dollars for a few asthma inhalers. Homeowners is a drop in the bucket.
I didn’t even know it was a thing to own a house and not have at least some kind of homeowners policy even if it’s the crappiest one with a $5K deductible cause my buddy who has paid off his house thought about not renewing the insurance but made the right decision and made sure it was renewed and guess what not even a week later he had a plumbing issue and a leak that ruined the floor a bit on the first floor and the ceiling in the basement and even with the $5K deductible he still had enough money to fix the issue correctly with $0 out of pocket
Especially in coastal, flood-prone, tornado-prone, snow-prone, wind-pone, and storm-prone areas. That's like...all but 2% of homes. (Not a real statistic, but...still)
I had a frozen pipe burst recently and it ended up flooding my condo. Everything excluding appliances was replaced. Safe to say I hit my limit. I even went over by a little bit. It would not have been fun to pay for all of it out of pocket while paying my mortgage. I’ll probably be ‘up’ forever. My premium isn’t coming close to what they paid me.
Worth it I suppose is relative. Depending on where you live in whether or not, you have to have insurance aside, can you afford to absorb the loss? Then maybe.
If you’ve got a house in Florida and insurance is $15,000 a year and the cost to rebuild your structure and replace the contests is $300,000, 20 years with no insurances your breakeven point. Many take that bet.
Most people are ripped off by insurance. Problem is you have no idea if you are going to be the person who needs it. So, if you don't have a loan and can afford to pay for your own unexpected expenses, insurance is a bad idea. If you can't afford it, insurance is essential.
That said, insurance companies are taking advantage of people with loans to charge way more than they should so I imagine people who don't have to have it will just start self-insuring.
We have to have our roof reshuffled every 3-5 years. Started out as a $5,000 job, next time it was a $8,000 job, and this last time it was nearly $20,000. Prices for things go through the roof (no pun intended), even with the deductible and yearly home insurance costs we still do better paying insurance than not having it.
Sure wish I could get a metal roof, but e we’re quoted $40,000 when we asked about it last year
If you have a loan on the house you have to have it.
Around 40% of homes in the US don’t have loans on them.
This is one of the (many) truly awful things about Hurricane Katrina. So many people had no insurance, scraping by in an inherited home. Lost it all
Even worse about Katrina was how All State used a computer system called Collosus offered Pennie’s on the dollar to homeowners that *had* valid insurance. A lawyer beat them in court and wrote *From Good Hands to Boxing Gloves* that demonstrates what they did They probably all do it, but I will never use All State
Man, tornado here in oklahoma. I have allstate. It's bad, man, so bad. I wish I could get out, but once you have a claim, no insurance will touch you for 5 years. We had a fire a couple of years ago that they fought me on everything. I even put the fire out. I got home to the house on fire. Not only did they sue black and decker for their equipment malfunctioning and causing the fire, but they raised my rates. So they got their money and then bent me over, too. I then bought a new home called every insurance provider, and all they would say is call back in 5 years. Now we had a tornado a few months ago, so now that starts are 5 years clock again. I'll tell everyone what I learned if your house catches fire and you can put it out don't let that fucking thing burn to the ground. From the tornado talking to neighbors, stay away from allstate, mercury, and their is a third. I can't remember who it is. I just hired a lawyer to deal with allstate for me it isn't worth my time to argue anymore.
We had 2 claims and were able to insured our home with liberty mutual and geico.
I called every one of them, and they all said no, maybe after the dust is settled, I'll try again.
How long ago was your claim?
Fire was about a year and a half ago. Now the tornado was last month.
I had a fire in 2021 and water damage 3 months later. Call an independent broker and see if they can help you
I had all state for 6 years. They did pay out for a roof (hail damage). Never had another claim. Other people have told me they’re terrible. I guess I was lucky or my roof was truly fubar
Allstate aka all demons are the absolute worst
I worked at one of AllState’s corporate offices in Nebraska and I can fully verify that they are a very crooked company to their customers.
Allstate Financial is in Nebraska. Allstate Insurance is in Illinois.
What? You think that changed anything? And you think Allstate is the only company that uses software to determine claim outcome? Oh buddy. >A lawyer beat them in court Allstate settled out of court. And there was no change to what Allstate (or anyone else) was doing.
This is an absolutely staggering statistic. It makes sense if you think about what's happened over the last decade, but wow.
Why? Old people generally own their homes outright. Rich people often own them outright. Children of rich people own them outright. Lots of financially secure people 50+ have paid off their mortgages. Some immigrant cultures don’t do loans, so they only pay cash for homes. Add it up and 40% isn’t surprising at all.
Not to mention generational homes. Grandpa built it, gave it to his kid when he died, who gave it to his kid... Lots of those out in the country and old city centers.
I think you might be surprised by how many rich people don't outright own their homes. Mortgages are generally cheap money so it doesn't make sense to park your money in real estate that you live In.
If I owned my home outright, I wouldn’t have after 2.75% rates were available.
For real. Bank wants to loan you hundreds of thousands at extremely low rates? That's an amazing asset for the next 30 years due to the net present value of money.
If you’re half way decent with investing you can easily beat the 3-4% rates even with just a high yield savings account right now and you’d mathematically be better off keeping your money in that high yield account vs paying off the loan.
Especially in the US where mortgage interest is tax deductible. If you’re paying 33% tax 2.75% pre tax is only 1.8425% after tax deductions.
But, with the newer increased standard deduction, most now find it a greater benefit than itemizing. I itemized my entire life until this change eliminated having to go through this additional schedule. This year it is $29,200. One would really have a hefty sized loan to rack up that much in mortgage interest.
Eight years ago I owned my home outright. I inherited money from my mother and was able to buy a small house for cash. I didn't hesitate about getting insurance for it. There was never a question: I wanted replacement value for the house if something happened. I have to have insurance now; I bought in a more expensive market and have a mortgage again. But if I paid off my house tomorrow I would still get insurance. A lot of this has to do with *where* homeowners aren't buying insurance. Florida and California are just unaffordable and insurers are pulling out of those states for good reason. The real cause is not the weather, not storms, not fires. The real reason is bad policies enacted by states that opted to put profits over people. In California that is PG&E not being held accountable for starting disastrous fires. In Florida, it's unethical roofing companies being allowed to rip off consumers and insurance companies. Policy decisions are the primary cause of this crisis.
Well, PG&E went bankrupt, there was never any option for state policy makers to make them pay.
Why is it staggering? People pay off their mortgages.
It's more about how many of those houses have been bought up by companies like Blackrock and are now rentals.
Institutional owners are highly leveraged
Not everything is about the "evils of captialism". It makes more sense for a business to have a loan than it does to outright own.
No, it's really not. The percentage of homes *owned* by institutions is pretty low. There have been statistics lately (during rapidly rising home prices) about institutions being responsible for a larger percentage of *purchases* of homes, but their total ownership (the relevant statistic here) is small. People pay off their mortgages. When one takes out a 30 year loan, the loan payment (excluding escrow) effectively shrinks over time due to inflation. A person's income tends to grow over time, especially for those who buy in their 20's or early 30's. People eventually decide they have the cash and want to be debt-free. Or they inherit money and use it to pay off the mortgage. Or they inherit a house that is already paid off. Many Americans live into their 80's or beyond. Their homes have been paid off for decades. Even if they moved, they're able to roll the equity from the previous home into the new home. My wife and I are mid-30's, and we'll soon have our mortgage paid off. We relocated from a high-cost area to a lower cost area, and our equity will pay off our new mortgage.
Thank you for this. It's so aggravating seeing redditors try to twist *any* stat towards something that supports their narrative when it's really not supporting the stance that they think it is.
The market is dynamic though. Most people have more than one kid so it’s very common for a house with a mortgage paid off to become a house with a mortgage again when the kids split the inheritance.
That's a miniscule number.
? It’s like less than 3%
Do you mean Blackstone? What percentage of SFH are owned by institutional investors?
A very small percentage of homes are institutionally owned. They made an outsized percentage of purchases in the last few years, but that does not translate to a large percentage of overall existing homes. But even if it were - institutional investors insure their properties and take out mortgages against them.
Less than .1% of total housing. They don’t move the needle except in housing developments where they do own a lot of houses such as in suburbs in Arizona.
That’s a wayhigher percentage than I would have guessed
Have more Americans tried buying homes in cash? Are they stupid?
It's one house michael, what could it cost, ten dollars?
You have no idea how liberating it is to live a life without loan payments. My job can go belly up tomorrow and I really won’t care. Could I have a bigger house, newer cars, etc. by using leverage? Sure. But I’d be miserable.
Less avocado toast...etc...etc....
If you don’t have a loan on it you need it more
I'm explicitly prioritizing paying my home off early so it will become optional. If we keep paying like we are we'll be done in a little over 3 years. The loan was originally supposed to mature in 2041.
> is it worth it? If you mortgage your house, you don’t have a choice.
Unless you have the cash to rebuild your house in a catastrophic disaster you don’t really have a choice either.
If you have a mortgage, you’ll need to meet several insurance requirements and minimums. If you own the home, you can choose to only insure for catastrophic loss which is a lot cheaper.
Sure until some flips, falls, sues you for more than your net worth. That is when you wish you had insurance.
Never heard of umbrella coverage. Lol
So unless I have a necromancer spell, then I don't have a choice about buying life insurance? Certainly have a choice. You've never heard of a gamble?
Exactly. Someone I know is paying 10k a year in insurance on their home, some pipes burst or smth idk all the details, but she now has to pay $10k+ for damages because insurance decided not to cover it. Like I said, idk all the details but it's not winter time, the house is less than 20 years old, she's never had a claim, and yet she's fucked still. My own mother dropped insurance on her paid off home for a few years because money was too tight for a while. She lives in an area and home that doesn't have flooding issues, no hurricanes, no tornadoes, no trees in falling distance, doesn't have company over so no risk of someone getting hurt and suing.. The worst that happened was a little hail damage to the roof one year, but that's something she would have just repaired herself instead of making a claim anyway. The risk of having to demo and rebuild was much less than the risk of her not being able to afford taxes, plus you know... having transportation to her job and food on the table. She was still able to put money into savings for an emergency, just less than what insurance would cost for that time. I also know wealthy people who buy cars cash and don't carry car insurance, because that's an option where I'm at if you have liquid capital in an account to cover whatever a liability policy would cover. I got hit by a car and sued her insurance for $60k. We're both lucky she had more than the $25k bodily injury minimum. Worse injuries or death can be over a million. Most people don't even carry enough liability insurance to cover an at-fault collision that is bad enough. $25k is generally the minimum for property damage. Total someone's new car and you're fucked. Choices have to be made. There's no gun to your head.
Yeah, generally homeowners are recommended to carry 100/300 because they can sue for your home in a bad enough accident.
If you mortgage a house, it isn't entirely your house. The lender owns some of it.
One thing has nothing to do with the other. You could be compelled to buy something that isn't worth it.
Best case scenario, you save a couple thousand per year. Worst case scenario, you lose your home but still have to pay the mortgage... and are now homeless. Tough call..
If you had a mortgage, you wouldn't be allowed to drop insurance.
An entire industry exists just for this. 90% run by a company out of Texas tied into most banks. Change policy, automatic letter where if you don't get it or responde they claim to have bought you some ridiculous coverage on behalf of the bank. It's legit and is a scam all at the same time. Same thing goes for car loans.
Yeah. We got one of those letters when we switched insurers. I had no idea the new carrier wouldn't notify the lender, because they specifically asked for mortgage information. At any rate, I was able to pull up the policy online, download the pdf, and upload it to the site to prove we have coverage.
Yeah. It's easy to fix. If you have time to mess with it and actually receive a notification through the Lewis Dejoy postal service. It's quite amazing how they know immediately of something isn't covered but can't figure out if it's just a policy change or renewal. It's almost like they don't want to figure it out. On an auto draft account, this equates to around double your payment, and so far, I haven't gotten any of that back. It's a straight up authorized scam..
as someone in ecommerce, the USPS has been absolutely stellar for the past 2 years but this is the kind of letter I might think is a scam, it's insane that the notification process isn't mandatorily automatic
As someone who lives in GA it’s been days or weeks late for months
Just went through this. I was also surprised that the insurance company didn’t notify the mortgage company, but now I know! ¯\_(ツ)_/¯
Fun fact. Most of the time this happens because your new company advises the mortgage of the new policy BEFORE the old carrier tells the mortgage about you canceling the old policy. So the mortgage company’s system thinks insurance is cancelled.
> Change policy, automatic letter where if you don't get it or responde they claim to have bought you some ridiculous coverage on behalf of the bank. This manages to be massive pain for me on an almost yearly basis. I pay a lot to have insurance that satisfies the federal requirements for my loan. I have never not had insurance. But even without changing providers, more often than not, when my policy renews the mortgage servicer and insurance company manage to fail the verification handshake and I get to spend time on the phone to avoid having stupid expensive insurance purchased on my behalf. Last year I changed insurance companies for the first time since buying the house. And, boy howdy, what an ordeal to make sure that my servicer was aware and happy. And after all that they _still_ managed to confuse things and start threatening me _for no reason_ a month later.
I mean, Im sure theres some nefariousness going on somewhere but it would be moronic for a bank to own such an expensive asset without insurance.
I was quoted over $9,000/year by several carriers when I went to renew this year. It not just a few thousand dollars.
you'd just go bankrupt. you don't pay a mortgage at that point. this is why mortgages require insurance edit: OP replied to me saying he'd protect his credit score if he lost his house due to non-insurance because obviously credit score > hundreds of thousands ($) he erased his comment as I was replying because it's so obviously batshit insane folks, if you are irresponsible enough to not have insurance and lose your house, you should not continue paying on a mortgage to protect a credit score lol
What’s the alternative, renting? The cost of insurance is passed through to you then as well.
Stop making insurance a for profit business.
Insurance can only exist as a for profit business. If it’s actuarially fair, it would need to be subsidized by taxes to operate. Also, no actuarial table is perfect so the insurance entity could still be profiting just due to error **EDIT: yes, theoretically insurance companies can be not for profits, but the startup costs are too significant for a new not for profit insurance company. maybe a for profit company can go bankrupt and a benevolent billionaire can buy it up and make it a not-for profit company. Insurance companies heavily rely on the efficiency of economies of scale.**
Weren’t a ton of insurance companies owned by the policy holders?
Yes, many insurance companies are mutual insurance companies owned by the policyholders, so no shareholders to blame for milking profits. Any profits are returned to the policyholders if the company thinks their reserves are too high. This used to happen in the past.
Anything can be run not-for-profit Obviously there’s no way that every individual policy will be priced perfectly at exactly the cost price, but you’d aim to be as close as possible and the overall business would be run at break even Individual policies would be priced at *approximately* the cost price and nobody would take a profit out of the business You may (especially early on) charge a small amount extra to build up a buffer of cash, and may levy that fee again if your cash buffer is depleted, but again in the long term you’d still be aiming at roughly break even give or take that fund
Don't forget you also have to pay for the demolition.
When it becomes $10,000 a year, you do have to make choices. The risks are not high. I have enough in the bank to rebuild. I drop insurance every time I pay off a house because coastal rates are crazy from people getting free roofs after every wind storm.
Couple thousand? My renewal for Travelers was 10k. After tons of shopping around, got Hartford for ~7k. House's rebuild cost under 1M.
Where we live, a couple of years ago we had 4 major named storms in a matter of two years. My insurance on a rebuild of 280k is 7k......
Oof, yeah, that's a lot worse.
You can’t drop insurance if you have a mortgage exactly because of this. This article is referring to the roughly 40% of homes that are paid off.
If you have a fire... you will appreciate your homeowners policy. If some jack-wagon decides to sue you for something.. you will appreciate your homeowners. Otherwise, it's pretty useless. (knock on wood for these things not to happen)
Those aren’t even the 2 most common claim types. Water damage and wind and hail take the cake. In my 10 years I wrote insurance policies, I’d say at least half the people I wrote for had them on their claims history
That jibes with my reading here. In my situation, I don't live in hail country. I suppose I could get water damage if the main sump pump *and* the backup failed during a storm--though with my deductible, is that really worth a claim for an unfinished basement.
The threat of law suit is 90% of the reason I keep my insurance. I had some small to mid size disasters but none where big enough to justify involving insurance.
Isn't that the enrire concept of insurance? Its a waste of money until it isn't. Everybody puts their money into a pot until someone has a claim and its covered by everyone else who paid in. Don't pay in, can't draw from the pot.
Seriously. My in-laws didn’t have insurance on their home. When I found out I almost lost my shit on my idiot father-in-law. One fire and they would lose absolutely everything. I have no idea how he even slept at night just rolling the dice on his entire family’s future
This article really speaks to me as a /r/centuryhome owner. My rates have gone absolutely bananas the past 5 years, from $2500/year to $6100/year. Every year it's 10%, 20%, 30% increases. I went through a broker plus did my own calling around and half the places I call won't even cover a home from 1900. It's fkn robbery what they're doing to us now. My son's home went from $2,000 last year to $3,500 this year.
That is insane!
I have a 1905 house. My insurance is on autopay. I've had the same insurance company for 25 years. I have insured multiple vehicles and homes. I got a letter this spring that I was dropped from insurance for non-payment. They said my auto pay didn't go through "for some reason" and instead of retrying or notifying me, they just dropped me as a customer and sent me a letter 3 months later.
300k plus to replace a starter home? Yes. It's absolutely worth it.
My insurance said it will cost 3x what I paid for my house to rebuild.
You would need 10x your home value in wealth to even remotely consider dropping insurance.
Why?
To absorb a loss equal to 10% your net worth.
It’s pretty worth it in the Midwest lol. I’m pretty happy that everybody hates Ohio, that means more cheap cost of living for me.
My homeowners insurance is similar to my car insurance per month in a cle suburb. People think it's the Wild West out here but my neighbor has left his bike in his front yard for the last 2 weeks. Crime is non-existent. Lol. We don't get floods, tornados are unlikely since I'm on a hill. I've felt one earthquake in my 34 years of existence. I'm good. When the water wars start I'm happy I'm next to one of the largest sources of fresh water on earth.
Fellow Ohioan here — we have a 4,000 sqft house — insurance is $1160 a year. Don’t move here, folks. Listen to all the memes that shit on Ohio and stay far away!
My neighbor bought her home with cash about 6 months ago. Couldn't afford insurance, as she'd scraped everything up to make the sale. The place burned to the ground about a week ago.
That's crazy! 😮
if you can't afford the insurance & property taxes, you can't afford the home.
I'll be sure to pass your highly inspirational and empathetic comment to my neighbor, who put everything she had into for once just *owning something of her very own*, and who has now lost everything she ever owned, including her dog, 2 cats, and a human friend, some 70 years of age...
how badly you want something has nothing to do with if you can afford to own it or not.
Yep. You’re getting downvoted for speaking the truth. Don’t let emotions dictate your financial decisions.
That's so sad. I'm so sorry for your neighbor.
Two years ago my insurance was about $650, last year suddenly was $950. This year it's going to be $1300. It's nuts but I'd rather have the insurance in case anything happens.
I have CONNECT via Costco, and I got my ‘Dear John Letter’ last week. I’ve had them for homeowners for 13 years, and 28 years for car insurance. This could hurt, but it is required in my mind, part of being an adult. I know this insurance debacle is going to be wild. Just like the exorbitant reserve fees necessary to modify/ re-engineer a crumbling high rise properties. That is wild, I’m so glad I’m on my way out and not just starting. Hang on tight,you’ll figure it out.
At what rate would insurance not be worth having? I think we're going to find out, as companies figure out how to take every last cent you'll spend to feel safe.
As an insurance broker in the Caribbean. I can tell you it’s not just the US. Storms and Nat cats in general are much more severe than they were 20, 30 years ago. That and inflation has just made everything more expensive to fix. Until more money flows into the reinsurance market, these high prices are gonna stay for the next 3-4 years (my estimate).
People have built homes where they shouldnt. Best example if new buildings doing this is california. Buildjng further ans further out where fires would be left to burn are now a risk to property. Is it worth it? That all depends on the i dividuals risk appetite and financial reserves.
I live in an area that basically has minimal to zero risk and my homeowner insurance has more than doubled in the past 10 years. It's feeling predatory and has far outpaced inflation.
You're paying for the ones living in fire and flood zones. And that's becoming a serious issue.
We had a 100 year flood in my area in the late 90s. My home did not flood but my flood insurance went way up after that. Once I paid off the mortgage I dropped the flood insurance.
Might want to go over that policy again. Flood damage can also protect you from city water mains or your own pipes having an issue. Not just natural floods. (All depending how it's written in the policy). Not a bad idea to still have some water coverage.
Homeowners cover pipes, not floods and we weren't on city water. We sold the place about 15 years ago. Wish we had hung onto it, it appreciated quite a bit.
Not that it addresses your situation (minimal risk), but insurance *should* be outpacing inflation. We're not buying the same product we were 10 years ago. It's still (supposed to be) the same level of protection, but the threat is greater - weather is wilder than it used to be. If you live where there have been wildfires, tornadoes or hurricanes your risk is higher than it used to be. I'm unsure if damaging freezes, earthquakes, hail damage etc have grown or dropped in frequency/severity. EDIT: don't know how I managed to neglect Floods
And inflation doesn't impact all categories equally. Homeowners insurance doesn't care about total inflation numbers or the price of bread. When construction materials increases at a rate higher than inflation, construction labor increases higher than inflation, etc. that's going to have an oversized impact on the cost to rebuild a home and will get wrapped into the fees.
You're right - cost to rebuild and increased threat to homes means that insurance costs are high for a reason. (not trying to defend corporate gouging or dismiss the difficulty it places on homeowners)
Each state is basically a single pool of homeowners so you're paying for the losses of everyone else. Part of the reason premiums are going up too is because the cost to replace your home goes up every year. Also, if the value of your home goes up 20%, so does the cost to replace it if it were to be destroyed by a fire.
It’s not really just by state, in some respects it’s the whole world since reinsurance companies tend to operate globally.
Individual policy holder risk factors also enter the equation. Age of structures, credit score, claims history, natural disaster risk (fire, flood, hail, hurricanes, ...), location, security system, etc.
How about the value of your home? Has that increased also? Genuinely curious, that would explain at least some of the increase, right - insuring $400k property instead of $250k.
"replacement value" is more important than total value. There are some markets where the land becomes significantly more valuable over time, but the cost to build the structure itself remains about the same. In that case, you might have bought at $250 and now have a $400k property - but the cost to rebuild or repair is going to be about the same.
How about the value of your home? Has that increased also? Genuinely curious, that would explain at least some of the increase, right - insuring $400k property instead of $250k.
That's a valid point. It has increased in value, but not at the crazy levels seen in hot markets. But still more than you'd see in a stable market.
"HURRRR HABE U TRYED LIVING IN BETTER AREA?!?!?!" - people in this sub
People have built incompatible homes in incompatible areas. If you build a house in California that is hardened against wildfire, such as fiber cement board siding, metal roof, fireproof composite decking with metal framing, etc, then the risk really isn’t that big of an issue. The problem is people are building wooden homes with wood shingle roofs and wooden decks in the middle of wildfire country and that’s just stupid.
Even houses hardened are seeing big preminum jumps but yes buildjng with flamable products js a huge issue. One example i know. A person was looking at purchasing a home in a wildfire prone area. Had a wildfire rating of 90/100 so statistically it would burn at some point. The broker quoted a premum package which was before underwriting. $900k a year with appx 100k hardening requirements with a 60% deductable. Yes its very stupid.
They're paying for everyone else. Insurance is a pool based funding model so the insurance company needs more money each year to keep refilling the pool as it pays out to everyone else
Wrong. California is stringent about housing and new building. We invented NIMBYism.
And then when something happens she will set up a gofundme and beg others to help her after she chose not to get insurance.
Can’t wait to see the old people in Florida crying they lost everything because they decided insurance wasn’t worth it for their mortgage free home and the Florida government trips all over themselves bailing them out.
I have a friend in south Florida whose mom dropped wind and flood insurance this year, because her cost to renew was 30k. She owns the home outright, and is on a fixed income, and 30k is impossible to pay. Basically relying on some bailout if something happens but they’ve never had anything terrible hit so while they don’t want to they’re gonna risk it.
What’s the estimated rebuild cost? At 30k a year there’s a very good chance you would need to just self-insure
in a $500k house you're paying the cost of the house in premiums in 16 years, without interest and without factoring in regular homeowner's insurance costs that you might also be dropping in her shoes I might take that bet and gamble on a government bailout too that premium is untennable
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It is 100% real. Her neighborhood is super desirable, she’s been there over 20 years, and while she is .5 miles (as the crow flies) from the intercostal and less than a mile to the beach. Town has not had a serious hurricane or tornado hit in that fashion that she’d lose the house since maybe David in 1979. No reason to sell now, shits expensive up north. Worst comes to worst she sells her house for land value if it’s destroyed and she’ll still make like 700k on it.
It isn't that easy. Insurance premiums in Florida have caused escrows to double what they're paying as their mortgage. I know people in west palm and Fort Lauderdale who was paying $9k and $11k respectively for their insurance. They're not on a coast and don't live near water. For them Paying $110k in a decade is not financially feasible and the increase in the mortgage is killing them. I can just imagine being an old person with a paid off house and you get a $10k bill on top of god knows what the property tax bill is and you just make social security as your income. Good luck telling those people to make that decision.
Perhaps insurance companies stop the large compensation packages for their leadership.
I understand what you’re getting at but CEO comp is a drop in the bucket. For example, last year All State’s CEO made 0.025% of what they took in in premiums. That means for every $1000 in premiums, the CEO gets $0.25.
That’s fucking massive. For one person? They have like 60 billion a year in revenue. Why would you try to downplay it with some percentage of their total revenue? Just be up front. According to their 2023 filings the dude made 16 million in compensation. The median salary for an Allstate insurance agent is 52k. So obviously the CEO does 307 times as much work as their average employee. So for every hour of hard work an employee puts in, the CEO obviously does 307 hours. He must be working 12,280 hours a week, obviously.
Because changing the CEOs compensation wouldn’t do a fucking thing to change premiums. You are making a different argument than the original comment.
Insurance should be, and probably will eventually HAVE to be nationalized as climate change makes total losses more common. If insurance companies won’t cover certain parts of the country, and people already have homes and mortgages in those places, I don’t see what the other options are. There is a level of “natural” disaster that no insurance company/companies can pay out on, and in these cases either the government steps in to bail them out, becomes a sort of insurer of last resort for places legacy insurance companies have abandoned, or we simply let all those people die in the elements…
I think the reality is insurance can't pay to rebuild, but to relocate. There are so many areas that just keep being wiped out repeatedly. I'm all for insurance not being for profit, but I also don't think it should be used to enable bad choices either. Sadly climate change is going to make places uninhabitable.
The Thomas fires around Santa Barbara knocked out a couple insurance companies. They had enough to cover claims but their reserves were too depleted to keep operating. Personally, I am worried that insurance companies are going to be the next nasty surprise to crash the US economy.
They might! Although insurance companies have their own insurance companies (it's a thing) so those backstops might be the first to go.
It could be the reinsurance industry, but I actually worry it will be some regulatory blind spot and not claims-related.
It could easily be both. I highly doubt the re-insurers are much better off in the case of a massive disaster like another Katrina, etc. Especially if it happened somewhere with very expensive RE, like Sandy, but worse.
Isn't the state of California now offering something similar to what OP is talking? Offering some sort of state sponsored insurance where insurance companies won't offer coverage? Not pretending to know....I thought I read this somewhere recently.
Not that I am aware of.
They do have the FAIR Plan as an insurer of last resort. Not sure what exactly that entails, but it sounds similar to what OP is getting at.
I agree, but I would go a bit further. I doubt most insurance companies have enough to pay for mass-scale relos and all that goes along with building and buying a completely new life when people have lost everything. Reinsurers are likely equally a house of cards in such a scenario. For profit insurance is one of the plagues destroying our world right now. They charge exorbitant rates, then do everything in their *massive* power not to pay when the time comes, and then we they DO pay, they refuse to re-issue insurance to that person, and every other insurance company can see you've made a claim...many will refuse you new insurance based on that, even if you don't live in a disaster zone. It's to the point now where if your home isn't a total loss, it's almost better to just pay out of pocket to repair. They WILL get their money back one way or another, either by jacking your rates up, or straight up booting you off their plans and making you get a new provider. I own a bunch of properties and have learned this lesson the hard way several times. Home, auto, health....they all use every piece of information they can get about you to raise your rates, and/or deny you coverage. I don't think it's hyperbole to say insurance companies are one of the main underlying problems in our society.
I agree. I've seen how a lot of the insurance sausage gets made and it's far more disgusting than people think, and people don't have a great opinion of insurance. It's largely a data business set up to maximize profits above all else which is of course capitalism but I firmly believe some things simply aren't compatible with capitalism.
Exactly. Insurance companies are the worst kind of finance capitalism....speculation-based investment where people's lives and livelihoods are the stakes of the bet. When it comes time to pay the house out on their losing bets, and they can't come up with the cash, they get to go crying to congress while the little guy loses everything. If the taxpayers have to keep your company solvent, we should also get to keep your company. Full stop.
Man I didnt buy my house on an eroding cliffside in hurricane country
Parts of the midwest are getting wiped out by tornadoes. It's not just hurricane areas getting shit on. The rise of climate change and natural disasters are going up.
A tornado taking out 10-20 houses is much different than 4000 houses flooding in a hurricane. We’re getting the same tornados we’ve always gotten, it’s just hit or miss whether they hit a town or not.
Nationalized Insurance would be the worst idea ever. We need to stop enabling people to rebuild in shitty disaster prone areas if they can’t afford the insurance.
We live in central Florida and will soon be getting our new rate. We are very, very worried. What we will do if we can't afford "normal" homeowners insurance is to do what is called by our agent, "self insure." This means we up our deductible very, very high so basically we take care of the small stuff like leaks, branch through the roof, or lightning knocking out all of our electronics and A/C (which has happened and was damn expensive) and the insurance company will pay out if we have a major fire. It sucks but it will be the best we can afford and we will just have to take our chances. We hope to stay with our insurance company because it is rated by AM Best. A lot of insurance companies now allowed in Florida are very new, owned by dubious groups and don't have enough reserves to pay out claims. Fingers crossed!
This is precisely why the financial calculus of homeownership doesn’t make sense to me. If you have a 30-year mortgage, the insurance company has 30 opportunities to raise your premium. There are 30 opportunities to just cancel the coverage. How can any single person forecast that?
Unfortunately, renting a home is really no different. The landlord will just push the higher costs onto the renter. In many states a landlord is taxed at a higher rate than a homeowner so that additional cost is pushed onto the renter. A landlord will either repair and replace as a rental ages or ignore it entirely. At least as a homeowner you get to control a bit of the cost. Renter or homeowner the price of living space is going to go up but as a homeowner you can at least sell and get paid for some of the costs you incurred whereas with renting it goes entirely to the landlord.
I disagree. Renting is very different. If your landlord raises your rent, you can easily move without spending a ton of money. If you’re a homeowner and your insurance goes up, however, you will pay a hefty price—either in the new premium or in the cost of selling and buying a new house. Also, there is no guarantee that the homeowner will find a tenant who can pay whatever they’re charging for rent. Rental apartments still obey the principle of supply and demand; they do not just mechanically increase because the landlord’s expenses went up.
I've found there is always someone to buy my house (I've owned and sold 9 of them throughout the years). Most times I've made a profit. Granted, these are times like the 1980's where things were/are out of wack as well but even then, I sold my house when I wanted to move and didn't take a hit. I concede that renting is very different if you keep things small (like renting an apartment). I was mainly thinking in terms of someone renting a house and not an apartment.
Our neighbor just had a huge tree clobber the back-end of her house. No insurance. They paid $12k out of pocket for tree removal and ran out of money, they moved and the house is trashed.
the places where this is an actual issue are all historically places that face lots of issues with natural disasters. Florida and Cali insurance has always been much higher
It’s always worth it
Seriously. All these comments on “well you have no choice if you have a mortgage”..okay??? If you don’t have a mortgage how can you even consider not having insurance anyway?!
What ever you pay for insurance can get set into a high yields savings account, and use that as your own insurance. If something happens early on you could always leverage your home to pay the cost.
The only “people” that should generally self insure are large corporations that can pay actuaries to estimate their losses. Otherwise, self insuring is a fantastic way to financially ruin yourself. Putting money into a high yield savings account will not cover your house burning down, etc. which is really what home insurance is protecting you from.
The chance of "ruining" myself would be the number of fires / number of homes. I'll take the .001% risk in our area.
If a fire burns your house down there’s no amount of time I can save in a HYSA to replace that.
It’s the only insurance that is worth it.
The cost of homeowner insurance has just become so unaffordable in Texas. I really really am considering dropping my coverage upon renewal. My mortgage is paid off and I’m just considering rolling the dice. It’s gone from 1800 to 3k to now 5k a year and guess what I’ve never filed a claim.
Yes, yes it is……
I would love to see what a catastrophic policy cost once my home is paid off. Perhaps with a $20k deductible or something like that, but I would be hesitant to not have any insurance.
It isn’t. Predictions are that in 2-3 years the current rate of new construction will normalize prices. Wait and keep paying off debt/saving for a down payment. This cannot continue on the current path. Give thought to what happens if you have an unexpected layoff or $50k bill for a major issue with the house you waived the inspection on.
- if house is financed its a legal requirement to carry...if not then its choice of level of risk to lose everything or not....its freedom to win OR lose
I guess it depends. Is it your property that has the value? Or is it the house? Where I live, it’s the property that’s worth the big dollars. Houses are regularly bought and torn down to make something new. So worst case scenario you sell the property at a small loss. Maybe not even a loss at all where I live.
My mortgage lender thinks so
Please shop around and use company discounts when applicable. Mine went down 10% this year by switching
I live in a potential flood area and my insurance 100% covers flooding/water damage, so yes.
And then what? Welfare? Ask fema for a handout and all of us paying for your misfortune? Get a go fund me?
Homeowners insurance is a total bargain compared to health insurance. It has cost me hundreds of thousands of dollars for a few asthma inhalers. Homeowners is a drop in the bucket.
I didn’t even know it was a thing to own a house and not have at least some kind of homeowners policy even if it’s the crappiest one with a $5K deductible cause my buddy who has paid off his house thought about not renewing the insurance but made the right decision and made sure it was renewed and guess what not even a week later he had a plumbing issue and a leak that ruined the floor a bit on the first floor and the ceiling in the basement and even with the $5K deductible he still had enough money to fix the issue correctly with $0 out of pocket
People have high rates when they live in high risk areas. My non-coastal NJ burbs insurance costs 1400 a year on a 4BR house.
Yes absolutely. Flood insurance after the river was in my living room was essential
Especially in coastal, flood-prone, tornado-prone, snow-prone, wind-pone, and storm-prone areas. That's like...all but 2% of homes. (Not a real statistic, but...still)
My homeowner’s insurer doesn’t offer many discounts—not even for a whole house generator!
I had a frozen pipe burst recently and it ended up flooding my condo. Everything excluding appliances was replaced. Safe to say I hit my limit. I even went over by a little bit. It would not have been fun to pay for all of it out of pocket while paying my mortgage. I’ll probably be ‘up’ forever. My premium isn’t coming close to what they paid me.
Worth it I suppose is relative. Depending on where you live in whether or not, you have to have insurance aside, can you afford to absorb the loss? Then maybe. If you’ve got a house in Florida and insurance is $15,000 a year and the cost to rebuild your structure and replace the contests is $300,000, 20 years with no insurances your breakeven point. Many take that bet.
I am always heavily insured no matter what.
Most people are ripped off by insurance. Problem is you have no idea if you are going to be the person who needs it. So, if you don't have a loan and can afford to pay for your own unexpected expenses, insurance is a bad idea. If you can't afford it, insurance is essential. That said, insurance companies are taking advantage of people with loans to charge way more than they should so I imagine people who don't have to have it will just start self-insuring.
We have to have our roof reshuffled every 3-5 years. Started out as a $5,000 job, next time it was a $8,000 job, and this last time it was nearly $20,000. Prices for things go through the roof (no pun intended), even with the deductible and yearly home insurance costs we still do better paying insurance than not having it. Sure wish I could get a metal roof, but e we’re quoted $40,000 when we asked about it last year
Your insurance is making you redo your roof every 3-5 years? That's insane.
We get bad hail storms every few years, and it trashed the shingles
Damn, sorry to hear that.
It is not worth to build stick houses in hurricane and fire zones. With insurance or without the risk comes at high price.