Finance
“$28,000 for a 2,100-square-foot apartment. Are you joking?’
Financial expert Suze Orman has raised concerns about the impact of climate change on the cost of property insurance, claiming it could threaten the American dream of homeownership. Orman, 72, faced a $28,000 annual insurance quote for her oceanfront condo in Florida, causing her to forego coverage entirely.
She highlights a troubling trend where rising insurance costs due to frequent and severe weather events could deter Americans from purchasing homes.
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“Climate change is going to make a big difference in people’s desire to own their own home,” Orman told DailyMail.com.
She pointed out that increasing unpredictability in places like Southern California and areas recently prone to major hurricanes is increasing homeowners’ fears, especially when combined with high mortgage rates.
This sentiment is supported by data showing a 23% increase in the national average home insurance cost within a year, now averaging $1,759. The premium increase follows a record year in which the US saw 28 natural disasters, each causing more than $1 billion in damages.
According to the News-Press, Florida has the highest home insurance rates in the U.S., and they are predicted to rise even further. In 2023, the average annual premium for Florida homeowners was $10,996. As of April, Insurify predicts a 7% increase this year, bringing the average cost to $11,759.
Orman’s frustration with insurance rates is palpable. Referring to her situation, she said, “$28,000 for a 2,100 square foot apartment. Are you joking?’
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Her decision to self-insure reflects a growing trend among homeowners who own their properties outright and choose to risk not having coverage.
Although self-insurance is becoming increasingly popular, it carries significant risks. In the event of a disaster, such as a fire or tornado, a homeowner without insurance would be responsible for all repair or rebuilding costs, which could have devastating consequences. Anyone considering this route should have a strong financial safety net.
The broader insurance market has responded to increased risks by increasing premiums and withdrawing from high-risk areas. For example, State Farm Insurance stopped insuring homes in California due to wildfire risk, reflecting a trend of insurers recalibrating their risk exposure due to climate change.
Insurance issues are further complicated by practices such as the “takeout” in Florida, where new companies pick lucrative policies and leave less desirable ones behind. This system, described by insurance executive Bruce Lucas on “The Insurance Guys” podcast, shows the evolving strategies to manage growing risks and opportunities in states like Florida.
As homeowners face rising costs and insurers adjust their strategies, the future of the American dream of homeownership appears uncertain.
Given these complexities and uncertainties, consulting a financial advisor can be especially beneficial to homeowners. If you are facing higher rates and are concerned about the impact of these costs on your long-term financial plans, including your retirement, an advisor can offer customized strategies to maximize your resources. They can help you assess your ability to insure yourself or find viable alternatives to manage and pay for coverage. Seeking professional financial advice will ensure that your homeownership and retirement goals remain achievable.
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This article Suze Orman decided to cancel homeowners insurance after an outrageous quote: “$28,000 for a 2,100 square foot apartment. Are you joking?’ originally appeared on Benzinga.com
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