Lew Sichelman
Practically no one doubts the necessity of health insurance, what with the long list of maladies that can befall a person. But apparently lots of people question the need for insurance to protect their properties.
Homeowners insurance usually covers losses and damages from theft, fire, wind, hail, snow, falling objects and vandalism. Policies even include liability provisions in case someone gets injured on the premises, say, or if your dog bites a guest.
And yet, 1 in 7 homeowners don’t have that safety net, according to LendingTree. That works out to 11.3 million owner-occupied houses that are uninsured.
Troubling, to say the least. After all, for most people, their homes are their largest asset. Without insurance, said Rob Bhatt, a LendingTree insurance expert and licensed agent, people are “just one disaster away from losing the physical and financial security their home provides.”
But the lack of coverage goes further than that. According to ValuePenguin, only 3.3 percent of U.S. homeowners have flood insurance under the National Flood Insurance Program. Some may have purchased flood coverage from private carriers, but just 3.3 percent are covered through the federal program.
“Flooding is the most common disaster in the U.S.,” reads the ValuePenguin report, adding that “one inch of flood water can cause $25,000 in damage” – a stat backed up by the Federal Emergency Management Agency.
Many Floods Happen Outside Flood Zones
And yet, flooding is the one major calamity not covered by homeowners policies. Flood coverage has to be purchased separately.
Flood insurance is required by lenders when the property is located in a high-risk zone called a special flood hazard area. Outside these areas, while coverage may not be required, it’s still advisable. Flooding can happen anywhere. Indeed, almost a third of the losses reported to the NFIP in 2024 came from areas not considered high-risk.
“Low flood risk doesn’t mean zero flood risk,” said ValuePenguin insurance expert Divya Sangameshwar.
Of course, whether to purchase flood coverage or not also depends on whether you can afford it. And the rising cost of coverage is keeping more and more owners up at night, according to mortgage technology company Maxwell. Many say the burden is making them rethink staying in their current homes.
In a poll of 1,200 homeowners who have owned their places for two or more years, Maxwell found that 57 percent would consider selling if the trend in higher insurance costs continued. Almost 1 in 4 are worried their insurance carriers may drop their coverage, leaving them in limbo.
In disaster-prone areas like Florida, the concern is even more pronounced. Bryan Mazanec of Tarpon Springs told Maxwell his insurance has “gone up year after year. It’s becoming less and less affordable to live here. We’re concerned about when the next premium is due, how badly we’ll be hit.”
People like Mazanec have every right to be anxious. A “staggering” 90 percent of those surveyed by Maxwell have experienced premium increases in the last two years. About half the respondents said their costs have gone up between 10 percent and 20 percent, while 6 percent of homeowners reported increases of more than 30 percent.
Insurance Premiums Jumping
In the nine years since Anthony Ianni bought his home near Denver, his annual insurance costs have leaped from under $1,000 to nearly $6,500. Now, he told pollsters, “We feel an increased push to look out of state to more insurable areas.”
Only 5 percent of the respondents don’t have insurance – half of those because it became too expensive, and 8 percent because their policies were canceled. Many of these owners are planning to “self-insure,” or cover their own losses. But Maxwell calls that strategy “risky and unsustainable.”
Meanwhile, those whose homes have been hit by a major disaster often feel trapped between slow-moving – or totally unresponsive – insurance companies, local building regulations and less-than-trustworthy contractors. Seeing an opportunity, some buy-out companies offer to purchase damaged houses for cash.
In a sense, these companies fill a space that FEMA, lenders and insurers don’t, providing liquidity for homeowners who don’t want to wade through uncertain insurance payouts, permitting delays, drawn-out repairs and inspections. But some see these companies as bottom-feeders, making a killing off of homeowners with nowhere else to turn.
Not so, said Joel Efosa, CEO of one such company, Fire Cash Buyer.
“Our goal isn’t just to buy damaged properties,” he said. “It’s to solve the bottlenecks that stop homeowners from moving on.”
Fire Cash Buyer operates like any other buy-in outfit. It will make a cash offer within 24 hours – no commission, no repairs, no closing costs.
“When we step in, [people are] often in [their] most vulnerable moment,” said Efosa. “We move quickly, not to take advantage, but to give them a clean exit when they’ve run out of options.”
The company also buys houses from anyone who runs into financial trouble – a divorce, for example – and from people with at-risk properties who want to move out of harm’s way.
“We don’t lowball sellers,” said Efosa. “A lot of people think they’re going to be taken advantage of. We make sure they’re not.”
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
