Insurance, the tail that wags the dog.

Alligatorob

Alligatorob

SF VIP
Location
Northern Utah, transplanted from Florida/Louisiana
I suspect in the end it may be high insurance rates that drives us to only building and living in safe places. Part of this problem has been created by our poorly thought out flood insurance thing.

Unaffordable insurance is not a very good way to regulate where and what people build, but in the end it could be what we do.

Average home insurance rates have risen to almost $8,000 in Florida with other states like Oklahoma and Louisiana not far behind.

Across the country, premiums are expected to rise 9% this year to an average of $1,784 nationally, after jumping 7% in 2022, according to Insurify, an insurance comparison site.

The increases are far larger in the most at-risk places, such as Louisiana, where Insurify estimates that home insurance costs average more than $5,000 annually, up more than 65% since 2021.

The crisis has forced a dramatic expansion in state-backed plans, which are funded by taxpayers and are often some of the highest cost options.

The situation has left many in the US - where, as in the UK, home insurance is typically required if you have a mortgage - facing desperate choices.

Louisiana resident Teddy Mars says he withdrew $12,000 from retirement savings last month to help cover a jump in his insurance costs.

Who will buy my house if they can't get insurance
https://www.bbc.com/news/business-66367224
 

Nathan said:
Our homeowner's insurance jumped up $1000 this past year. Insurance is a legal form of extortion.
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Also a rigged bet in which the insurance company is 'betting' you won't need it and but you think you will. But if the individual bets are too risky the billion dollar corporations can drop and not place your mandatory bet in many states.
 

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Nathan said:
Our homeowner's insurance jumped up $1000 this past year. Insurance is a legal form of extortion.
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My only cause for "buyer's remorse."

And this is the first house I've ever bought, so my first encounter with a homeowner's policy.

In Calif, the tricky parts of homeowner's insurance is everything associated with Fire. From total destruction to a few scorched spoons, you've got a million boxes to tick ...or not tick, and those are the ones that could devastate you.
 
Alligatorob said:
I suspect in the end it may be high insurance rates that drives us to only building and living in safe places. Part of this problem has been created by our poorly thought out flood insurance thing.
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I agree flood insurance is ridiculously expensive. Maybe with climate change it isn't possible to figure out future risks, but it would sure help if building standards were strict enough to avoid the need for flood insurance. Where I lived in Nebraska our house was three feet up but we still were required to pay for flood insurance (until the mortgage was paid off, after that I dropped the flood insurance), but when the neighbor built his house he built 4 feet up because it turned out that flood insurance wasn't required for that height.
 
I had an uncle on the Texas gulf coast. Their insurance paid for "falling" water but not "rising" water. He joked that when a hurricane was coming they would all get up on top of their houses with an axe. I honestly think people should quit building along the shore line. At the very least they should be building back with the newer "hurricane proof" materials.

I live in Oklahoma. It was sticker shock here, for sure. I decided to do without.
 
HoneyNut said:
I agree flood insurance is ridiculously expensive. Maybe with climate change it isn't possible to figure out future risks, but it would sure help if building standards were strict enough to avoid the need for flood insurance. Where I lived in Nebraska our house was three feet up but we still were required to pay for flood insurance (until the mortgage was paid off, after that I dropped the flood insurance), but when the neighbor built his house he built 4 feet up because it turned out that flood insurance wasn't required for that height.
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The problem with flood insurance is that it's mostly provided by the government. The reason is that no private insurer could withstand the cost of a large flood, like what happened in Katrina, Sandy, Harvey, etc. Insurers can't reserve enough to cover sudden losses in the billions. The only private flood insurance available is at high cost and only selectively to those who's risk of flood is low.

The government has done a very poor job of pricing and providing flood insurance, and that's coming back on us now. Too many policies have been issued at too low a cost on high risk properties. And rates have often been set based as much or more on political pressure as real risk or business sense. The availability of that insurance has lead to extensive development in floodplains and high risk places. Without it developers couldn't get funding and homeowners couldn't get mortgages. Then when a big storm or flood hits the government is stuck with paying out far more than they've collected.

Our federal flood insurance program lost $18 billion in Katrina (https://www.iii.org/sites/default/files/1007Katrina5Anniversary.pdf). This does not include the billions spent by the government for non-insured losses. The problem is that flood insurance rates were too low for years, and those who really understood the hurricane and flood risks in Mississippi and Louisiana knew that. However rates were kept low for political purposes.

For example the flood insurance rates in the New Orleans area were set based on the assumptions that the levees would not fail. Their failure was no surprise to those who understood, when I was at LSU in the 70s we talked about it all the time. Better levees could be built, at a cost, but there will never be a failure proof levee system for New Orleans, can't do that for a City much of which is below sea level and has no good foundation to build most of it's levees on, just soft mud. It's been our government's flood insurance that has subsidized much of that below sea level building...

Also worth pointing out that much of the levee building and it's cost is by the federal government, so we are double subsidizing development behind those levees. We have long known that bigger levees bring bigger floods. See Lanterns on the Levee (originally published 1941) and Levees Make Mississippi River Floods Worse, But We Keep Building Them. At a minimum I think we should no longer insure, or maybe even allow development that requires levee protection...

The first New Orleans levees were about 3 feet high, built beginning in 1717 and started failing soon there after, since then the levees have gotten much bigger and more extensive, and so has the flood damage (http://archive.oah.org/special-issues/katrina/resources/levee.html). Putting a city in a floodplain on soft mud just isn't good sense.

Could tell a similar tale of other floods, I just know Katrina and New Orleans best. I don't know as much about the fire risk problems in places where wildfires can burn hundreds or thousands of homes all at once it has to be similar. Earthquake insurance probably the same.

I think the government needs to get out of the insurance business, providing or subsidizing it anyway. I know it would be rough for some people for a while, but I think it would force better decision making on the part of developers and homeowners. If it had never been created we would not have the extensive flood plain development we do now... trying to retain it will just make things worse.
 
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I do have a lurid past. I've done some horrible things. Probably the most disgusting was, at one time, I was an insurance salesman. I've been in recovery for some time now.
About flood and natural disaster insurance, I've always been amazed that some, gripe about paying $10,000 for insurance to replace a $250,000 home, when the house sits below the flood level in a flood plain. Insurance is not a charity organization, it's a business. If you own property in an area prone to natural disasters, and you want to insure it, you have two choices. One, get crappy cheap insurance, or pay an arm and a leg for the best insurance. Maybe building next to a river in a flood plain, which gets multiple hurricanes and tidal surges, isn't such a great idea.
 
fuzzybuddy said:
I do have a lurid past. I've done some horrible things. Probably the most disgusting was, at one time, I was an insurance salesman. I've been in recovery for some time now.
About flood and natural disaster insurance, I've always been amazed that some, gripe about paying $10,000 for insurance to replace a $250,000 home, when the house sits below the flood level in a flood plain. Insurance is not a charity organization, it's a business. If you own property in an area prone to natural disasters, and you want to insure it, you have two choices. One, get crappy cheap insurance, or pay an arm and a leg for the best insurance. Maybe building next to a river in a flood plain, which gets multiple hurricanes and tidal surges, isn't such a great idea.
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You make some good points. Another option is to let people build what and where they like, but do not subsidize insurance, and don't provide government assistance in rebuilding. There are many ways to reduce flood impacts. In New Orleans most of the older houses are two story. When they were originally built the downstairs was designed to flood with minimal damage. Now most have filled in the downstairs with flood prone rooms.

I lived in one of those high flood risk houses in Florida, it flooded about once every 10 years. When I rebuilt I did things like raise the electrical as high as I could, only tile floors, and no insulation. It reduced the damage from floods, but the Flood Insurance people didn't care. Even though my last premium notice was for more than $10,000 over the time I owned the home I collected a lot more than I spent on the insurance. As you say, not a sustainable business, only our government does it...
 
I wonder how many people are over insured. I changed insurance companies. We live above a creek. Our home placed property is listed as a 500 yr flood plain so no need for flood insurance , but I insisted we pay for flood insurance - $600 bucks a year. Hey, mama that creek can rise and we've see it do so before. No use taking a chance.

With that said though, had the new insurers come out and inspect our home as they said replacement cost would be 1.4 or .5 mil. They came out and agreed with me that it would be virtually impossible for us to have a complete burnout as the walls are over a foot think with concrete and covered with further insulation.
It has a metal roof and its built "like a bunker'.

We pay $2076 a year for home insurance. Think most people overpay because if you think about it, you always have your slab, driveway and land - except in earthquake or lava zones. That can me a hefty
reduction in payments to take that off the valuation. After all, ever seen an insurance company give you
money back for your and...lol.
 
My homeowner's policy went up $1000 per year also, I lowered the coverage and upped the deductible to keep premium down...:unsure:
 
Liberty said:
We live above a creek. Our home placed property is listed as a 500 yr flood plain so no need for flood insurance , but I insisted we pay for flood insurance - $600 bucks a year. Hey, mama that creek can rise and we've see it do so before. No use taking a chance.
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That's not bad, to cover a 1 in 500 risk of destruction. Using the $1.5 million and 500 years that's $3,000 a year...

500 year floods happen, my cousin near Baton Rouge lost his home to one, and he had no flood insurance...
Muskrat said:
I must say that i play the insurance lottery. My primary home has no insurance. My project home has no insurance either. And i just dropped full coverage on two of my cars. It is risky…but necessary.
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No one who can stand to pay the cost of home or car replacement should get insurance. It's always a bad bet, except maybe when government subsidized, like some flood insurance.

I only have liability on my cars for that reason. However I don't feel like I could stand to lose my home, so I pay homeowners, and for earthquake insurance. About $1,000 for the homeowners and $2,000 for the earthquake. I do so knowing I am probably losing money on the deal, but I sleep better at night.

Its a calculation all should make, if your insurance rates are high that is a warning that you are at higher risk.
 
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Most insurances are scams to get your money. You pay premiums year after year. However, make 1 claim and your premiums always go up the next year. It's a racket!

To make a claim, you have to get a lot of paperwork done, then you submit your claim and often you wait and wait. While you wait and wait, the company has their team of lawyers going over your claim to see how they can get out of paying you anything.

The deal is stacked against you and the insurance companies are laughing all the way to the bank and grinning like crazy all the way back to the office.

Sure feel sorry for those home owners in Florida and Louisiana. Seems to me they are going up the creek and they have lost the paddle.
 
Packerjohn said:
Most insurances are scams to get your money. You pay premiums year after year. However, make 1 claim and your premiums always go up the next year. It's a racket!

To make a claim, you have to get a lot of paperwork done, then you submit your claim and often you wait and wait. While you wait and wait, the company has their team of lawyers going over your claim to see how they can get out of paying you anything.

The deal is stacked against you and the insurance companies are laughing all the way to the bank and grinning like crazy all the way back to the office.

Sure feel sorry for those home owners in Florida and Louisiana. Seems to me they are going up the creek and they have lost the paddle.
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I've made several insurance claims, including some substantial flood insurance claims. I never had a problem. My flood insurance premiums did go up, way up, but that was more a part of a national program than based on my claims. Not long after purchasing this house a hail storm came through, did about $30k in damage, no problem getting paid and no increase.

I do know auto insurance often rises after a claim, but I have never made a claim against my insurance. Since I only carry liability that would have to be for the other persons car in an accident where I was at fault. None of those yet, fingers crossed.

Insurance is like any other product, shop around and buyer beware. And don't get it unless you really need it.
 
Has anyone considered just dropping insurance? I've lived in my house for decades and never made a claim of any kind. But because of my location it keeps going up every year, because someone else makes a claim. It's all a scam but you can't fight the corporations. They own and run this country. And it's becoming an issue that will cause me some financial problems in the future.
 
MikeyDude said:
Has anyone considered just dropping insurance? I've lived in my house for decades and never made a claim of any kind. But because of my location it keeps going up every year, because someone else makes a claim. It's all a scam but you can't fight the corporations. They own and run this country. And it's becoming an issue that will cause me some financial problems in the future.
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We considered dropping our insurance a few years ago, since this is a large house that my husband built himself - never had a mortgage, but we decided to "deal" with the insurance and if we got a quote which would basically cover the inside portion of the home which is probably what would be damaged, we'd take it. The house isn't a normal stick house so the inside is the issue portion not the structure itself since its bunker built...lol.

Used to be insurance companies would not "deal" like that but things have changed and competition has
gotten stiff for them.
 
Several years ago, my homeowners insurance did a widespread “inspection“ of properties they insured. They mandated that hand railings be installed by all of my door entrances despite the fact that I’ve never had anyone visit in 14 years of residence who required railings. They also thought that the roof on my gazebo looked sketchy, and should be replaced.

I got stuck with installing unused railings, but as my gazebo is essentially a lawn ornament that is never occupied, had them remove it from coverage.. I hadn’t even been aware that the picturesque item was covered, anyways. Between property taxes and insurance costs, one struggles to afford a property these days… 😩
 
When my husband retired from 22 years in the air force we were at Warner Robins base in Georgia and decided to buy our first house ever there. We hired a builder who was putting up new houses in a subdivision, the houses had siding on three sides and a type of stucco on the front.

He built us a pretty dusty-rose colored house. When it was done an inspector came and okayed the house. I thought he was looking for all sorts of possible problems, but it turns out he was mainly just checking for termites. Termites retire to Georgia.

Five years later we decided to sell it and move to Ohio to be closer to family. The realtor sent out an inspector who discovered that the entire front of the house had been built incorrectly, with no drainage behind the stucco, and all the sticks were rotted black with mold. We would need to have the whole front torn down and rebuilt.

The next day we called our home owners insurance agent and told her the problem. Her exact words were, "We had a meeting about that, this morning, and no, we don't cover it."

@squatting dog's cartoon is funny because it's true.
 
Alligatorob said:
Yep, and if you can afford to replace your house then I would drop it. Most people pay a lot more into insurance than they ever collect, this is necessary to pay for the occasional total loss.
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It's not just the cost of replacing one's house, demo and debris removal have to be factored in.

In 1994 there was a major earthquake with an epicenter quite near our house. House was valued at approx $425K at that time (property included) and damage was roughly $125K.

Thank heavens we not only had insurance, but it was with a provider who had very few policies in the area so we got immediate attention. The quake was on a Monday and by the following week they'd dispatched a San Diego team of structural engineers and adjusters to look at the damage.

We took photos of everything and were paid in a timely manner as we got estimates and the work progressed.
 
Yes, to be fair, when our kitchen and half the house got flooded from a burst pipe last year, the insurance company sent restoration people to clean it all up and paid for everything.
 
Insurance didn't come close to covering our loss when the house burnt down. Wife's blood pressure and some other issues became a problem or I'd have fought them more and demanded a mediator. (didn't need the wife ending up in the hospital). Sometimes... you just have to back up and punt. :mad:
 

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