First, damaging hurricanes drove up home insurance costs in Florida. Now, wildfires are causing premiums to spike in other states like California.
Insurance rates in ritzy Sunshine Stater enclaves including Bel-Air, Beverly Hills, Montecito, and even Napa Valley are facing hikes so extreme that potential buyers are reconsidering whether they want to purchase a new home or forgo home insurance altogether. In the Hollywood Hills, one woman who was supposed to sign-off on a $25.6 million mansion in February was presented with afire insurance quote to the tune of $200,000 per year. “She almost fell off her chair,” Peter Mac, a broker with boutique real estate firm, The Agency, told Bloomberg. “She wanted to renegotiate.”
Related Stories
- Inside a New Long Island Home That Puts an American Spin on a Classic European Country House
- A Historic Clinton Day-Designed Home Near San Francisco Is Up for Grabs at $6.5 Million
- Baz Luhrmann Just Relisted His Dramatic N.Y.C. Townhouse for $16 Million
Then, in March, State Farm announced that it was discontinuing fire insurance policiesacross the state ahead of the 2024 wildfire season. A whopping 72,000 property owners are expected to lose coverage and almost 70 percent of the homes are in ZIP codes where the median sale price was $1 million and above last year, Bloomberg reported.
First, damaging hurricanesdrove up home insurance costsin Florida. Now, wildfires are causing premiums to spike in other states, like California.
Insurance rates in ritzy Sunshine Stater enclaves, including Bel-Air, Beverly Hills, Montecito, and even Napa Valley, are facing hikes so extreme that potential buyers are reconsidering whether they want to purchase a new home or forgo home insurance altogether. In the Hollywood Hills, one woman who was supposed to sign off on a $25.6 million mansion in February was presented with a fire insurance quote to the tune of $200,000 per year. “She almost fell off her chair,” Peter Mac, a broker with boutique real estate firm The Agency, toldBloomberg. “She wanted to renegotiate.”
Then, in March, State Farm announced that it was discontinuing fire insurance policiesacross the state ahead of the 2024 wildfire season. A whopping72,000property owners are expected to lose coverage, and almost 70 percent of the homes are in ZIP codes where the median sale price was $1 million and above last year, Bloomberg reported.
Longtime Bel-Airresident John Morris is one of the homeowners whowill have his coverage cut off in 2025. Morris told the news site that after the American International Group canceled his policy in 2022, he switched over to a $22,000 per year plan with State Farm. However, he’ll now have to scramble to replace his current coverage. “There will be options, but they’re going to be a lot more expensive,” Morris said. “It’s a problem that’s not going away.”
Longtime Bel-Airresident John Morris is one of the homeowners whowill have his coverage cut off in 2025. Morris told the news site that after the American International Group canceled his policy in 2022, he switched over to a $22,000 per year plan with State Farm. However, he’ll now have to scramble to replace his current coverage. “There will be options, but they’re going to be a lot more expensive,” Morris said. “It’s a problem that’s not going away.”
It’s a similar story in Florida, where insurance rates tripled over the last three years. On the ultra-exclusive Star Island, homeowners are now paying upwards of $600,000 for annual policies due to climate risk factors. There are implications for other states as well. Across the country, premiums have surged 23 percent since January 2023, CNBC reported. Both the Midwest and Southwest are among the areas where rates have risen the most, according to a report by Bankrate. Nebraska, Oklahoma, and Kansas were among the most expensive states for homeowners insurance, per the analysis, and in Louisiana, the average premium shot up 63 percent compared to last year due to hurricane risk.
“Insurance is where many people are feeling the economic impacts of climate change first,” Carolyn Kousky, associate vice president for economics and policy at the Environmental Defense Fund, told The New York Times. “That is going to spill over into housing markets, mortgage markets, and local economies.”
Authors
Abby Montanez
Abigail Montanez is a staff writer at Robb Report. She has worked in both print and digital publishing for over half a decade, covering everything from real estate, entertainment, dining, travel to…
Read More
Related Stories
- Inside a New Long Island Home That Puts an American Spin on a Classic European Country House
- A Historic Clinton Day-Designed Home Near San Francisco Is Up for Grabs at $6.5 Million
- Baz Luhrmann Just Relisted His Dramatic N.Y.C. Townhouse for $16 Million
FAQs
The insurance industry is in the midst of a correction due to a significant increase in catastrophic events such as hurricanes, wildfires, floods, and more. This has resulted in some clients facing challenges, ranging from higher rate hikes to non-renewals.
Does homeowners insurance cover natural disasters? ›
A: Your home insurance policy covers many natural disasters and weather events, including wind, hail, lightning strikes and wildfires. However, it does not cover damage caused by floods or earthquakes. You would need a separate policy for each of these perils. Many homeowners may not realize this until it's too late.
Which natural disaster causes the most property damage? ›
Cost of damages caused by natural disasters in 2023, by type of disaster (in billion U.S. dollars)
| Characteristic | Damage in billion U.S. dollars |
|---|
| Storm | 100.8 |
| Earthquake | 51.9 |
| Drought | 22.1 |
| Flood | 20.4 |
2 more rowsMay 21, 2024
Structural damage and loss of housing often lead to increased insurance claims and a decreased supply of housing. Severe storms and earthquakes can also negatively impact the economy due to people losing their jobs and roofs over their heads.
Is there such a thing as catastrophic home insurance? ›
Catastrophe insurance is an umbrella term for a variety of riders that help fill in the gaps of your home insurance policy, including the types of storms that are covered and the policy limits for all covered events (meaning you get more protection and pay less out of pocket).
What disaster is typically not covered by property insurance? ›
Floods. Flood coverage is excluded from all types of homeowners insurance policies. Climate change has caused devastating flood events to happen more frequently across the country, especially in recent years.
Can a natural disaster cause of life or property damage lose? ›
A natural disaster may cause loss of life, injury or other health impacts, property damage, loss of livelihoods and services, social and economic disruption, or environmental damage.
What is natural disaster insurance called? ›
Catastrophe insurance protects businesses and residences against natural disasters such as earthquakes, floods, and hurricanes and against human-made disasters such as riots or terrorist attacks. These low-probability, high-cost events are generally excluded from standard homeowners insurance policies.
What type of insurance covers damage to property such as a home? ›
Homeowners insurance covers losses and damage to an owner's residence, furnishings, and other possessions, as well as providing liability protection..
What happens if your home is destroyed? ›
If your destroyed home was insured and in the State of California, you now have the right to collect all benefits that would have covered rebuilding your destroyed home, and use those benefits to buy a replacement home instead. California law specifically requires insurance companies to pay the same amount they would ...
Earthquakes. The geologic shudders called earthquakes rank among the most devastating natural disasters on Earth—and a reminder of how restless our planet is.
What is the most powerful type of natural disaster? ›
A tsunami is one the most powerful and destructive natural forces. It is a series of waves (not just one) caused by a large and sudden displacement of the ocean. Tsunamis radiate outward in all directions from the disturbance and can move across entire ocean basins.
What is the number one most common natural disaster? ›
Flood. Ninety percent of natural disasters within the United States involve flooding. Consequently, floods inflict more economic damage and loss of life and property than any other natural hazard.
How much property damage do natural disasters cause? ›
Overview. The U.S. has sustained 387 weather and climate disasters since 1980 where overall damages/costs reached or exceeded $1 billion (including CPI adjustment to 2024). The total cost of these 387 events exceeds $2.740 trillion.
Will housing be cheaper if the market crashes? ›
During a housing market crash, the value of a home decreases. You will find sellers that are eager to reduce their asking prices. Sellers may be more motivated to bargain on price or make concessions to buyers.
What happens to house prices when the economy crashes? ›
What happens to house prices in a recession? While the cost of financing a home increases when interest rates are on the rise, home prices themselves may actually decline. “Usually, during a recession or periods of higher interest rates, demand slows and values of homes come down,” says Miller.
What is Act of God insurance? ›
An act of God, sometimes called a force majeure event, is any sudden and/or unexpected event that cannot be under reasonable control by humans. In terms of insurance policies and liability, acts of God are events in which people or parties cannot be reasonably held accountable by insurers.
What natural disaster is typically not covered under home insurance? ›
What Disasters Are Not Covered by Homeowners Insurance? Flood damage and earthquakes aren't covered in a standard homeowners insurance policy. You would instead need to buy separate flood insurance or earthquake insurance on top of a home insurance policy.
What type of insurance will cover problems that happen to your house? ›
Homeowners insurance covers damage to your home's structure and personal belongings and protects you if someone is injured on your property. It's important to understand your policy's limitations and when to elect add-ons, such as scheduled personal property, earthquake, flood, and water backup coverage.
What is considered a catastrophe for insurance? ›
You might think that any storm damage claim counts as a catatrophe, but a catastrophe claim refers to single-event, widespread losses expected to be more than $25 million. These claims can be difficult to process as insurance adjusters may have trouble getting into disaster zones to meet with policyholders.
Explanation: Hurricanes most impact insurance companies primarily due to the destruction of homes and businesses, which leads to huge claims that insurance companies must pay.
What disaster is often not covered by insurance? ›
Damage caused by floodwaters is not covered. Home insurance typically doesn't cover damage from floods, tsunamis, or earthquakes. Flood insurance is a type of property insurance you usually buy separately.
Do insurance companies benefit from accidents? ›
Car insurers may raise your rate after you get into an accident and file a claim.
