Homeowners' Insurance .... everywhere.

[Rick Lee]

Lenders will require insurance. Some charge something like 25 bps for an escrow waiver. But they generally wrap taxes and insurance into your monthly payment and it's counted while qualifying for the mortgage. We just got notice of a $1000 escrow shortage due to increasing taxes and insurance. We can either write a check for it or just have $83/mo added to our monthly payment.

[wdfifteen]

Originally Posted by onewhippedpuppy

Zero claims on either, it’s all because of losses in other parts of the country. Or at least that’s the excuse.

My insurance company is claiming the increases are due to the increased cost of material and labor. That makes some sense, except for the size of the increase.
I suspect the price has increase because:

1. Inflation! Everybody's doing it, so we will too!
2. An actual increase in material and labor.
3. To cover the cost of losses in other parts of the country.

Even though my company doesn't insure properties in California or SEC country, I suspect their cost of re-insurance has gone up because of the disasters.

[Crowbob]

Originally Posted by Tobra

I know a guy who cancelled his insurance and burned down his paid off house so his future ex-wife would not get half of it

A few years back a guy bulldozed his house for the same reason. At the time I couldn’t comprehend such a thing.

Now I can. In fact, I’m surprised it doesn’t happen on a daily basis.

[fintstone]

NC is similar to CA as folks that run the state have prevented insurance companies from properly addressing risk and raising maximum rates as necessary for a long time...until insurers started refusing to insure many and often leaving the state altogether. Competition for policies dries up. Eventually, this forces massive increases (or the company does not renew coverages). Of course, the state sets maximum rates and if you are a good risk (and your insurance company values your business), you are likely paying far less than the maximum.

Insurers like USAA consider credit scores, past claims, zip codes, and how long they have insured you when they insure a property...and set prices to match. There is a lot of fraud, and a lot of folks use homeowners to do maintenance on their homes. When we have discussed insurance here on PP, some folks have posted that they regularly make claims and get a new roof ever 5 years. One is better to have very high deductibles and only use insurance in a catastrophic major loss. I pay to put on a new roof myself (every 20-30 years). I insure 8 homes (5 different states) with USAA and have no problems getting coverage). The same with cars. I have 6 cars insured and have never made a claim. The rates for my homes and cars have risen, but they are nowhere near the maximum rates in the states I insure them. Like almost every service and commodity, when the government gets involved and regulates it, it eventually ruins it/makes it more expensive or unavailable. Health insurance is another great example of this.

[jyl]

States generally try to hold down premiums for homeowners’ and related insurance, while risks have been rising due to climate change, cost of materials/labor/permits, higher values, higher litigation risk, building in riskier places. Insurance industry has been pushing states to permit large premium increases, by gradually withdrawing from the market. In FL for example, almost no national insurer does flood insurance any more.

I think last couple years have been the tipping point, some big states have been forced to reform their insurance rules to be much more insurer-friendly - FL and CA being the examples I know of. If the industry can break the resistance of the big states, they’ll be able to break the resistance of smaller states - withdrawing from NC or ID is a lot easier than from FL or CA. And yes, major disasters in one state do tend to increase premiums in other states.

So insurance premiums will go up generally. Maybe not all at once. I just increased my homeowners’ coverage and added earthquake coverage here in Portland, and the added cost was reasonable. But I expect to get hit here eventually.

I read that 1/5 of FL homes are un-insured. I don’t know if that is true, maybe it only refers to flood coverage.

Going un-insured (liability-only) could make sense in some rare cases. Probably not for most people. You may be confident your house is not at risk of wildfire or hurricane, but what about an ordinary house fire or falling tree or burst pipe? Do you have $1MM cash laying around?

My guess is that the insurance industry is not unhappy to see more people go uninsured. For the most part, that is probably the worst risks self-selecting themselves out of the insurance market. They didn’t want to insure those risks anyway.

Kind of like how the health insurance industry would be perfectly happy if everyone over 50 decided to go uninsured for medical.

[jyl]

Travelers just made an interesting comment on the L.A. fires. While they aren’t saying anything about their expected loss yet, they did say that if 2Q or 3Q are “very active” for catastrophic loss, it is “possible” they could tap into their reinsurance layers for 2025. We know their (pre-fire) planned catastrophic loss, the historical seasonality of cat loss, and their reinsurance stack. So we can infer very roughly what loss they may be looking at for the fires. I’m guesstimating around $1BN and not over $2BN. Travelers has about 4% market share of the CA HO market I think. $1BN/0.04 = $25BN. Plus FAIR’s exposure, which while looking smaller than I originally thought, is still probably large. If the insurance industry does suffer a $25-35BN loss from the fires, the pressure to raise rates bigly will be huge. I mean, that could wipe out a decade of underwriting profit in the state. And they know the risks are rising. Insurance companies have the clearest, least biased view on climate risk you’ll find.

[Dixie]

Originally Posted by ryans65

What happens when banks are loaning money on properties that the buyers cannot afford to insure?

The bank forecloses.

[Noah930]

Originally Posted by onewhippedpuppy

Aren’t most homeowners insurance policies amortized into the mortgage payment?

Somehow mine isn't. Neither are our property taxes. We were first-time buyers way back when, and somehow that's how it got set up when we closed on our house.

[ryans65]

I guess I should have phrased this better,

Let's say, hypothetically speaking, what happens when an area (or entire state) becomes uninsurable and someone is looking to buy a house in that area and the premium is more than the mortgage payment if you can even get insurance? The banks require the policy... what if you cannot even insure said property or get quoted a premium that is unaffordable?

Originally Posted by Dixie

The bank forecloses.

[Noah930]

And you've just cleared escrow? Meaning you purchased the home and now can't find insurance? I'm sure every state handles it differently, but in CA isn't that what the FAIR plan covers?

[Noah930]

Here's a boo hoo story for you, kind of along the lines of the question (uninsured/underinsured) you were asking, ryan. There's a story of some "investor" who lost his beachfront house in Malibu. He bought it for $19 million. He sank another $7 million into renovations. He was planning on listing it for $44 million this spring. He couldn't find insurance for it on the open market, so he went with the FAIR plan...with its cap of $3 million. He claimed he's still got his mortgage and taxes to cover, though now no golden egg. He's domed.

Edit: https://www.yahoo.com/news/investor-spent-27-million-mansion-184557553.html

[Scott Douglas]

My wife has asked me to video record every room in the house.

Fun project but I find I have way too many options camera wise to make any headway on it.

[ryans65]

Dear god he's screwed!

Originally Posted by Noah930

Here's a boo hoo story for you, kind of along the lines of the question (uninsured/underinsured) you were asking, ryan. There's a story of some "investor" who lost his beachfront house in Malibu. He bought it for $19 million. He sank another $7 million into renovations. He was planning on listing it for $44 million this spring. He couldn't find insurance for it on the open market, so he went with the FAIR plan...with its cap of $3 million. He claimed he's still got his mortgage and taxes to cover, though now no golden egg. He's domed.

[Rick Lee]

If you're already in your mortgage and your insurer cancels or non-renews, the bank will tell you to find a new insurer. If you don't, they probably have one for you, but it will be way more expensive.

[jyl]

Originally Posted by ryans65

I guess I should have phrased this better,

Let's say, hypothetically speaking, what happens when an area (or entire state) becomes uninsurable and someone is looking to buy a house in that area and the premium is more than the mortgage payment if you can even get insurance? The banks require the policy... what if you cannot even insure said property or get quoted a premium that is unaffordable?

House prices tank hard.

Which is why CA and other states are letting insurers raise rates much more than consumers or regulators would like - trying to protect housing market.

[greglepore]

I’m for some national regulation inasmuch as my premiums in a relatively very risk free zone shouldn’t reflect risk in areas like hurricane prone and fire prone areas. Most folks live there by choice, and should have to make it economically viable. Nobody subsidizes heating oil for folks in Maine or North Dakota.
Between tiding insurance and property taxes the older folks are going to get severely squeezed. And the generations after will have, rightly, little sympathy.


Sent from my iPhone using Tapatalk

[Rick Lee]

Originally Posted by Noah930

Here's a boo hoo story for you, kind of along the lines of the question (uninsured/underinsured) you were asking, ryan. There's a story of some "investor" who lost his beachfront house in Malibu. He bought it for $19 million. He sank another $7 million into renovations. He was planning on listing it for $44 million this spring. He couldn't find insurance for it on the open market, so he went with the FAIR plan...with its cap of $3 million. He claimed he's still got his mortgage and taxes to cover, though now no golden egg. He's domed.

Edit: https://www.yahoo.com/news/investor-spent-27-million-mansion-184557553.html

I have to wonder how he got a mortgage for such a property with FAIR insurance at the capped face amount. Sounds like the bank didn't do its due diligence. You know the old saying, "If you owe the bank $10,000, you have a problem. If you owe the bank $10,000,000, the bank has a problem." Anyone in this guy's position should have it all in an LLC and walk.

[RANDY P]

Bank knows they are up $hit creek with the insurance. They are going to give one-off deals, simply not foreclose, forced-place coverage, etc. etc.

CA did precisely what you should NEVER do with a potential risk. You deal with the risk by

-Eliminating the risk. Fix the reason or your approach so there's no risk
-Accept the risk. If the risk is manageable and/or cost effective to fix if it happens, accept.
- Insure or outsource the risk. Buy insurance or pay someone else to cover.

CA tied the hands of insurance companies, ran them out and by doing that assumed the $250BN risk. They transferred the risk from the Ins. Co to the homeowners and taxpayers.

Precisely what NOT to do. Stupid, stupid, stupid move and now they are paying for it. They should've left the Ins. Co alone.

rjp

[RANDY P]

Originally Posted by Rick Lee

I have to wonder how he got a mortgage for such a property with FAIR insurance at the capped face amount. Sounds like the bank didn't do its due diligence. You know the old saying, "If you owe the bank $10,000, you have a problem. If you owe the bank $10,000,000, the bank has a problem." Anyone in this guy's position should have it all in an LLC and walk.

Private money, maybe Mafioso would be my guess

If you see the guy in a wheelchair next month, we'll know.

rjp

[jyl]

Originally Posted by RANDY P

Private money, maybe Mafioso would be my guess

If you see the guy in a wheelchair next month, we'll know.

rjp

He’s described as a multimillionaire real estate investor, implying he didn’t use a mortgage - anyway, he’s a dumb**** to have relied on FAIR, that kind of property, you go to excess & surplus carriers, maybe two of them, and get customized coverage.