If you’ve been in the market for a house over the past few years, you’ve likely kept an eye on interest rates — and for good reason. A few points one way or the other on your mortgage rate can translate to a difference of tens of thousands of dollars in buying power.
But looking ahead, it may be important for homeowners and prospective buyers alike to focus on another factor, at least according to Mark Cuban.
“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,” the billionaire entrepreneur and investor recently posted on Bluesky. “Florida in particular is going to have huge problems.”
While insurance experts may quibble with his certainty, they say it’s hard to argue with the overall sentiment. “I think it’s safe to say that that’s an accurate statement,” says Shannon Martin, an insurance analyst at Bankrate.
Home insurance costs on the rise
While you can legally own a home without a homeowners policy, financial institutions — such as your mortgage lender — generally require you to have coverage. You’re typically insured for damage to your dwelling, related structures, personal property and liability, in case someone is injured or their property is damaged at your house.
On average, you’ll pay $2,304 per year for a policy with $300,000 in dwelling coverage, according to Bankrate, a 17% increase from January 2022. Certain individual factors tend to drive up costs. You’ll pay more if you have a trampoline or a pool, for instance, both of which boost the odds of injury at your home.
You’ll pay more if there is a higher likelihood that you’ll make a claim to repair a home damaged by weather. Hurricane-prone Florida residents pay an average of $5,527 per year for $300,000 in dwelling coverage, according to Bankrate, second only to windy Nebraska.
The situation is only going to get more expensive for those who live in disaster-prone areas, experts say. For one, insurance companies are getting better at understanding extreme weather risk, says Martin.
“More insurance companies have been using technology and AI to get into predict-and-prevent mode instead of a reactive mode,” she says. “They’re starting to be able to pinpoint what homes are really at the higher risk, narrow it down.”
While that may be good news for people who live in the low-risk areas of high-risk states, homeowners in disaster-prone areas “may see rates go up drastically,” Martin says.
Should proposed policies such as a regime of tariffs on foreign materials come to pass under the upcoming Presidential administration, building costs are likely to go up, too, experts say. That’s bad news for policyholders, who bear the cost of what it would take to rebuild a damaged home.
“Houses cost more to build, which makes them more expensive to buy and more expensive to insure,” says Leslie Kasperowicz, managing editor and insurance expert for Insurance.com. “Add in a high-risk location, and you have a recipe for a crisis.”
What to do to combat rising home insurance costs
It’s not hard to see how rising homeowners premiums could price families out of homes they could otherwise afford — especially if spreading climate disasters continue to put more and more homes at risk. After all, the difference between the typical annual cost in Florida and the national average is more than $2,000 a year.
Here’s what experts say you can do to keep costs down.
If you already own a home
Only about 7% of homeowners say they’ve moved to areas with lower risk of extreme weather over the last five years, according to Bankrate. If you’re staying put, taking measures to protect your home against weather damage can drive down your insurance costs.
“Making changes and upgrades to your home to reduce the risk of damage can really drop rates,” says Kasperowicz. “In Florida, insurance companies are required to provide a discount for wind mitigation efforts; the same applies to wildfire mitigation in California. But no matter where you live, a new roof will always make a huge dent in your rates.”
If you’re intent on living in a high-risk area, you’d be wise to move such projects up your list of priorities when it comes to spending on your home.
“My best advice for the average homeowner that feels kind of tired and financially tapped out is to understand that extreme weather happens year-round, and it’s an ongoing plan,” says Martin.
That means if you’re considering painting or adding new carpet this year, you might be better off upgrading your storm shutters or removing a damaged tree from your property.
If you’re shopping for homes
If you have some flexibility in terms of location, factor in home insurance costs early in your search, experts say.
“Start by looking at average rates in the areas you’re considering. While that won’t tell you what you’ll pay, it will give you an idea of how various areas compare at a high level,” says Kasperowicz. “Choosing to live a little further from the source of the risk can make a huge difference. That’s especially true when considering distance from the coast.”
Martin recommends using online tools — such as the one available through the First Street Foundation – to determine if a particular location may have significant future climate change risk. Ideally, she says, you want to be able to buy a home with the knowledge that you can be financially secure and physically safe, wherever you choose to put down roots.
Once you decide on an area, start asking your local real estate agent about insurance costs to give yourself a full picture of what you’ll be paying on a monthly basis.
“You can and should get quotes before you get too far into the buying process,” Kasperowicz says. “You don’t want to be near closing and find out the insurance is unaffordable.”
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