Ken Brown fears he will be forced out of his home if his home insurance premium continues to rise.
The 71-year-old retiree who lives near Rapid City, South Dakota, has seen his annual coverage with American Family increase nearly 110 percent in the past year — from $1,665 to $3,490.
Ken has a steady retirement income, while his wife Valeria, 68, still works to help cover the insurance bill – and a host of other rising costs.
U.S. home insurance rates will hit a record high this year — with the typical annual premium rising 6 percent to $2,522 by the end of 2024, according to bleak new forecasts.
But for Ken, and many others like him across the country, the reality is much worse, as they bear the brunt of an industry in crisis.
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The shock increases
Home insurance premiums in the US have increased in recent years.
This is largely due to escalating natural disasters, insurers pulling out of certain states – reducing competition – labor shortages and higher home repair costs.
Rising costs are making coverage increasingly unaffordable for many Americans, and Ken is concerned that it will ultimately be unsustainable.
“I’m worried about next year because they talked about how the increases will be the equivalent of what they were this year,” he told DailyMail.com.
“If there is no relief in sight and they don’t take it seriously, I will be forced out of my home. We could get an apartment, but that would only be temporary, and the rents will also go up. We just don’t know what we’re going to do.’
The couple built the house in 2004 for about $212,000, and it is now estimated to be worth about $417,000. South Dakota is seeing an influx of wealthy residents from Colorado and California, Ken said, driving up home values in the state.
He has not filed any claims in the past year and said American Family also reduced coverage for hail damage to his home.
“What upset me more about the price increase is that there was no warning whatsoever – they never emailed me,” he added.
Ken believes there should be some control over the extent to which companies can increase their premiums as a result of catastrophes.
“Why should I pay more for my insurance because there are people who live on the Gulf Coast and suffer losses year after year? “There has to be some level of control over the percentage increases each year, otherwise the government will have to get involved and condone some of their losses,” he said.
‘Because otherwise people would be forced onto the streets.’
American Family told DailyMail.com it cannot discuss a specific customer’s policy.
According to predictions from insurance comparison platform Insurify, the typical annual premium will rise to $2,522 by the end of 2024
Insurers are withdrawing from states
Jeff Waack also thinks that higher authorities will have to intervene if premiums continue to rise.
“I hate that everyone has to increase their insurance, but I believe people should pay more reasonably for the chance of disaster. “If you build next to a place that floods every year, you would have to pay more insurance,” he told DailyMail.com.
‘I pay a little more to help everyone, that’s fine. But not this craziness that happened.”
Jeff is the treasurer of a West Hollywood apartment home to 54 owners.
This year, the home insurance quote went up from about $23,000 to $116,000 – a monumental increase of 400 percent.
“Our management company sent proposals to twelve different insurance companies this year and every one of them refused to give us a policy, including LIO Insurance which we have been with for the past four years,” Jeff said.
In both California and Florida, insurers have withdrawn from the state, while others have refused to renew existing policies.
Jeff Waack said he ‘almost fell off his chair’ when he saw how much insurance premiums had risen this year for a West Hollywood apartment building
Jeff said the West Hollywood building is not in an area at particular risk of wildfires, hurricanes or flooding
State Farm, California’s largest insurance company, announced last month that it would stop offering insurance to 72,000 homes due to the increased risk of natural disasters and the effects of inflation.
“It’s so upsetting and feels like a slap in the face,” he said.
‘I don’t understand why they suddenly say that you are not a good risk. We have paid our contributions on time every year. If you wanted to increase our rates by 5 or 10 percent, we could have arranged that.”
West Hollywood is an urban area and is not particularly at risk from wildfires, hurricanes or flooding, Jeff added. He has lived in the building for decades and says the last claim he remembers was 18 years ago.
As a last resort, the condo was forced to take out coverage from a non-California licensed company, meaning it sells policies that are not backed by the state.
“I almost fell off my chair when I saw the award,” Jeff said. “It feels like they arbitrarily picked a number high enough to really benefit their bottom line. They know they got us and we have to go for it.
“They could have said $200,000, and what would we have done? We had no choice.’
A crumbling industry
While premiums are rising across the country, some states are worse off than others.
Florida’s home insurance crisis in particular has intensified in recent years as costly natural disasters have made it difficult for insurers to maintain profitability in the state.
More than a dozen home insurance companies have declared bankruptcy since 2019, major insurers have said they will not renew thousands of policies, and Farmers Insurance withdrew from the state entirely last year.
Hurricane Ian caused $109.5 billion in damage in 2022. According to the National Oceanic and Atmospheric Administration (NOAA), this was the third costliest disaster to hit the US and the most destructive in Florida’s history.
To fill the gap left by major carriers refusing to provide coverage, state insurers are increasingly becoming the only choice as a last resort. In Florida, the state-owned Citizens Property Insurance Corporation is now the largest in the state.
“It’s possible that the highest risk areas could become uninsurable,” said Betsy Stella, vice president of carrier management and operations at comparison platform Insurify.
‘But if there is demand, a supplier usually appears. The question will be: at what price?’
Financial guru Suze Orman told DailyMail.com earlier this year how she gave up coverage on her oceanfront condo in Florida after her insurer quoted $28,000 a year.
The financial advisor and author fully owns her Florida condo, meaning she could give up the cover.
She said: ‘I’m not paying $28,000 a year and the insurer will probably dispute any claim I get anyway. Luckily I have the money to insure myself. $28,000 for a 2,100-square-foot apartment. Are you joking?’
According to a recent report According to the Consumer Federation of America, more than six million homeowners do not have homeowners insurance – which amounts to approximately $1.6 trillion in unprotected value.
Jewell Baggett, 51, sits on a bathtub amid the wreckage of her home in Horseshoe Beach, Florida, which Hurricane Idalia reduced to rubble in August 2023
What can you do to reduce your premium?
Coverage costs have increased due to the losses insurance companies have suffered from hurricanes, wildfires, tornadoes and floods, explains Greg McBride, chief financial analyst at Bankrate.
Because of the way insurance is regulated, insurers usually have to get permission from the state to increase premiums, but when massive disasters occur, this usually means that insurers first incur huge losses and then have to increase premiums to recoup. he said.
There are steps you can take to potentially lower your premium, says Greg McBride, chief financial analyst at Bankrate
But there are steps you can take to potentially lower your premium.
McBride recommends shopping around at different insurance companies to compare prices and see if you can get a better deal.
“Keep in mind that a ‘better deal’ may still mean a higher premium than what you paid last year, but not as high as your existing carrier,” he said.
Increasing your deductible can mitigate the increase somewhat, he added.
A deductible is a set amount you pay out of pocket for damage to your home before your insurance pays the rest.
Most homeowners insurance policies have a deductible of at least $1,000.
But McBride warns that unlike car insurance, where increasing your deductible can have a more noticeable impact on your premiums, with homeowners insurance you often have to take on a lot more risk before you see much of an impact.
“Be sure to notify your insurance company if you have recently made any upgrades that could reduce the risk of loss, for example, a new roof or glass windows in hurricane areas,” he added.