I posted last week after learning that my homeowner’s insurance will cost 19% more this year. The insurer sent a letter saying that the reason was that Washington State no longer allows insurance companies to charge based on credit score. My credit score of 835 is now diluted by hordes of low scores.
That doesn’t include actual insurance hazards, since our western Washington climate is mild and hardly ever has serious storms. But many other retirees are impacted.
https://www.nytimes.com/2022/02/04/business/retirement-clima…
**Extreme Weather and Rising Insurance Rates Squeeze Retirees**
**Homeowners’ insurance in high-risk states is becoming prohibitively expensive for older Americans who want to keep their homes.**
**By Martha C. White, The New York Times, Feb. 4, 2022**
**...**
**While Florida residents are not the only ones wrestling with rising homeowner's insurance prices, the state’s popularity with retirees means that it is a problem a growing number will confront, experts say. When drawing up a budget for living on a fixed income, most would-be retirees think about services and goods, such as doctor visits or prescription drugs, that are likely to cost more in the future. Almost no one thinks of home insurance — an omission insurance professionals warn will be an increasingly costly mistake.**
**Many Americans’ plans to retire in a coastal Sunbelt state or a scenic mountain hamlet are on a collision course with extreme weather — and the property damage that follows....**
**After absorbing punishing losses from floods, hurricanes and wildfires in recent years, many insurers are re-evaluating their risk modeling practices. The upshot for many homeowners is higher property insurance bills. Others can find themselves struggling to get a policy at any price....** [end quote]
Rising property insurance costs — particularly when combined with higher property taxes in areas where home values have risen significantly — are especially relevant for clients considering buying investment real estate for passive income generation. This strategy is popular among retirees and even some younger investors. The recent overhaul of the federally subsidized National Flood Insurance Program compounds the headache — and expenses — for property owners who are required by their mortgage holder to carry flood as well as homeowners’ insurance.
The article has a list of reasons that losses are higher and rebuilding is more expensive.
I was working on my budget this week, as I always do at the start of the year. While I can absorb the rising prices, many retirees on a fixed income may be forced out of their homes. And what about the ones who can’t get insurance at any price, or at an extremely costly insurance pool price?
Climate change will inexorably lead to gigantic losses. This is the beginning. Like high cirrus clouds signaling an approaching storm front.
Wendy