Financial expert Suze Orman has raised concerns about the impact of climate change on property insurance costs, claiming it could threaten the American dream of homeownership. Orman, 72, faced a $28,000 annual insurance quote for her oceanfront Florida condo, which resulted in her forgoing coverage entirely.
It highlights a worrisome trend in which rising insurance costs due to frequent and severe weather events could deter Americans from buying homes.
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“Climate change will greatly alter people’s desire to own their own home,” Orman told DailyMail.com.
She noted that increasing unpredictability in places like Southern California and areas recently prone to major hurricanes is increasing homeowner anxiety, especially when coupled with high mortgage rates.
This assessment is supported by data showing a 23% increase in the national average home insurance cost in one year, to an average of $1,759. The increase in premiums follows a record year in which 28 natural disasters in the United States resulted in losses exceeding $1 billion each.
According to the News-Press, Florida has the highest home insurance rates in the U.S. and is expected to continue to rise. In 2023, the average annual premium for Florida homeowners was $10,996. As of April, Insurify is forecasting a 7% increase this year, bringing the average cost to $11,759.
Orman’s frustration with insurance premiums is palpable. Referring to her situation, she said, “$28,000 for a 2,100 square foot condo. Are you kidding?”
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Their decision to “self-insure” reflects a growing trend among homeowners who own their properties outright and are choosing to take the risk of not having insurance coverage.
Although self-insurance is becoming increasingly popular, it carries significant risk. In the event of a disaster, such as a fire or tornado, a homeowner without insurance would be responsible for any repair or reconstruction costs that could have devastating consequences. Anyone considering this route should have a strong financial safety net.
The broader insurance market has responded to the 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 problems are further complicated by practices like Florida’s “take-out,” in which new companies select lucrative policies and leave behind less desirable ones. This system, described by insurance executive Bruce Lucas on The Insurance Guys podcast, shows the evolving strategies to address 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 with a financial advisor can be particularly beneficial for homeowners. If you are experiencing higher interest rates and are concerned about the impact these costs will have on your long-term financial plans, including retirement savings, an advisor can offer you tailored strategies to maximize your resources. They can help assess your ability to self-insure or identify viable alternatives to managing and financing insurance coverage. Seeking professional financial advice will ensure your homeownership and retirement goals remain achievable.
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This article Suze Orman decided to give up homeowners insurance after receiving an outrageous quote: “$28,000 for a 2,100 square foot condo. ‘Are you kidding me?’ originally appeared on Benzinga.com
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