Dear Commons Community,
There’s passionate debate about how to solve America’s ongoing housing crisis, much of which revolves around mortgage rates, zoning issues, immigration and construction. However, billionaire entrepreneur and investor Mark Cuban believes the biggest issue of all is being overlooked by the public.
“Home insurance in areas hit by repetitive disasters is going to be the number one housing affordability issue over the next 4 years. And possibly going into the midterms. More so than interest rates,” he said in a post on Bluesky. “Florida, in particular, is going to have huge problems.”
Home insurance rates have surged, driven primarily by two key factors: inflation and climate change.
The cost of labor and building materials for homes has risen rapidly since the pandemic. Although the price of lumber has recovered, the National Association of Home Builders says things like drywall, concrete and steel mill products are still selling at elevated prices.
For those with a replacement cost insurance policy, it can cost the insurer more to cover the cost of replacing your home without taking depreciation into account. The risk this presents will be reflected in your premium.
While homes are more expensive to replace, they’re also more prone to damage because of climate change.
Severe floods, wildfires and hurricanes have become more frequent, which must be factored into the underwriting of property insurance. According to the Insurance Information Institute, “cumulative replacement costs related to homeowners insurance soared 55% between 2020 and 2022.”
In fact, major insurers like Farmers and Progressive have either left states like Florida or limited their exposure to these disaster-prone regions. Mark Friedlander of the Insurance Information Institute said, “We have estimated up to 15% of Florida homeowners may not have property insurance, based on input from insurance agents across the state.”
Homeowners and potential homebuyers should be aware of how risky it is to go without coverage and prepare for the cost of adequate protection.
Lowering the cost of home insurance may seem difficult with these facts at hand, but it is still possible to shop around for a better deal on your home insurance.
I just experienced what Cuban expresses above and I don’t live in a disaster-prone area of New York (thank God). My insurance was set to increase twenty-five percent for the coming year. I called my broker and she said exactly what Cuban is saying about insurance. She indicated that the company handling my insurance wants to get out of the home insurance business even though it has been my insurer for almost thirty years. Through her good work, she found another insurer who issued me a policy that was actually less than my previous policy.
Thank you, Linda!
Tony
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