You Must Invest With Caution In These Select Markets
The Rising Cost of Homeowner’s Insurance Can Ruin Your Returns
The string of natural catastrophes that have taken place over the recent handful of years has left the property insurance industry in shambles. Wildfires, floods, and hurricanes have all played a part in the steep increase of insurance premiums across the country.
These are the 10 states in which rates have risen the most, and the 4 ways you can mitigate your exposure to insurance risk.
Florida
Florida ranks #1 for the most expensive home insurance in the United States - 421% higher than the national average. Last year, homeowners saw a $9,213 increase in their annual premium.Oklahoma
Property insurance in Oklahoma is now 170% higher than the national average. While the average home value currently sits just below $197K, the typical homeowner pays $4,782 per year towards insurance.Mississippi
Mississippi homeowners were hit with an average insurance premium increase of 23% last year. More importantly, insurance rates rose 433% higher than incomes did in 2023; and the cost of insurance in Mississippi is already 127% more than the national average.Texas
In Texas, premiums are currently 124% higher than the national average, and in 2023 homeowner insurance costs rose 452% more than wage growth.Kansas
Last year insurance rates in Kansas crossed over the $3K mark; averaging $3,245 per year. Kansas homeowners currently pay 83% more than the national average in order to have coverage on their properties.Georgia
Homeowners in Georgia experienced a 17% spike in property insurance costs last year. The average rate across the state is $2,173.Nebraska
Homeowner’s insurance in Nebraska is almost 2X the national average. Last year homeowner’s rates rose roughly 14% to $3,519.Massachusetts
Unlike some of the other states that have been listed, homeowner’s insurance in Massachusetts is actually slightly lower than the national average. However, the cost to cover your property in Massachusetts, has risen 582% higher than wage growth and income levels.New York
Property insurance in The Empire State is roughly 10% higher than the national average. New Yorkers pay about $2,000 per year for coverage.Colorado
Lastly is Colorado. Annual home insurance costs have surpassed $3,300; making coverage 87% more expensive than the national average.
Although we’re all somewhat at the mercy of the carriers to a certain extend, there are a handful of ways in which you can mitigate your exposure to insurance risk.
Avoid High Risk Areas:
Not every zip code and city within the aforementioned states are being equally affected by the insurance premium volatility. Locales such as flood zones and other coastal regions that are prone to property damage caused by inclement weather, are more subjective to spikes in insurance costs. With this in mind, it’s important to be hyper-critical of an asset’s location; not just at the city or neighborhood level, but all the way down to the street it’s on, and position in which the lot is situated.
Underwrite for the Worst Case Scenario:
Whatever placeholder you’ve been using for the insurance line item within your underwriting model, double it (maybe even triple it). Being overly-conservative with your figures never hurt. But being blind-sided by a 50% spike in your insurance premium costs when you least expect it can be a death blow. Now more than ever, it’s important to plan for the worst. This will help keep you prepared for any curve balls that may come your way.
Shop All Options:
Most of us have a ‘go-to’ insurance provider. They’re often times the first call you make when you manage to pull a new deal under contract. In the past, your search may have started and ended there. But when dealing with insurance cost volatility, you have to dig deeper into your rolodex of carriers, and perhaps even explore new companies you’ve never worked with before. You can’t leave any stone unturned when shopping for the best premium possible.
Own the Asset Outright Without A Traditional Mortgage:
The larger the acquisition, the more impractical this last option may be. It can be extremely tough for a non-institutional investor to take down a $30M+ deal with all cash and no debt. But if you’re able to side-step an agency loan and pull off the purchase with all equity, or utilize a private lender that has less stringent insurance requirements, you can avoid dealing with the insurance risk roller coaster that’s taking the entire real estate industry for a ride.
If you’re considering a home purchase or investment this year, and you’d like professional guidance and assistance throughout the process, our team is more than happy to help.
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