Yahoo Finance Natural Disasters Are Making It Harder for Wealthy Homeowners to Insure Their Properties
First, damaging hurricanes drove up home insurance costs in Florida. Now, wildfires are causing premiums to spike in other states like California.
Insurance rates in ritzy Sunshine Stater enclaves including Bel-Air, Beverly Hills, Montecito, and even Napa Valley are facing hikes so extreme that potential buyers are reconsidering whether they want to purchase a new home or forgo home insurance altogether. In the Hollywood Hills, one woman who was supposed to sign-off on a $25.6 million mansion in February was presented with a fire insurance quote to the tune of $200,000 per year. “She almost fell off her chair,” Peter Mac, a broker with boutique real estate firm, The Agency, told Bloomberg. “She wanted to renegotiate.”
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Then, in March, State Farm announced that it was discontinuing fire insurance policies across the state ahead of the 2024 wildfire season. A whopping 72,000 property owners are expected to lose coverage and almost 70 percent of the homes are in ZIP codes where the median sale price was $1 million and above last year, Bloomberg reported.
First, damaging hurricanes drove up home insurance costs in Florida. Now, wildfires are causing premiums to spike in other states, like California.
Insurance rates in ritzy Sunshine Stater enclaves, including Bel-Air, Beverly Hills, Montecito, and even Napa Valley, are facing hikes so extreme that potential buyers are reconsidering whether they want to purchase a new home or forgo home insurance altogether. In the Hollywood Hills, one woman who was supposed to sign off on a $25.6 million mansion in February was presented with a fire insurance quote to the tune of $200,000 per year. “She almost fell off her chair,” Peter Mac, a broker with boutique real estate firm The Agency, told Bloomberg. “She wanted to renegotiate.”
Then, in March, State Farm announced that it was discontinuing fire insurance policies across the state ahead of the 2024 wildfire season. A whopping 72,000 property owners are expected to lose coverage, and almost 70 percent of the homes are in ZIP codes where the median sale price was $1 million and above last year, Bloomberg reported.
Longtime Bel-Air resident John Morris is one of the homeowners who will have his coverage cut off in 2025. Morris told the news site that after the American International Group canceled his policy in 2022, he switched over to a $22,000 per year plan with State Farm. However, he’ll now have to scramble to replace his current coverage. “There will be options, but they’re going to be a lot more expensive,” Morris said. “It’s a problem that’s not going away.”
Longtime Bel-Air resident John Morris is one of the homeowners who will have his coverage cut off in 2025. Morris told the news site that after the American International Group canceled his policy in 2022, he switched over to a $22,000 per year plan with State Farm. However, he’ll now have to scramble to replace his current coverage. “There will be options, but they’re going to be a lot more expensive,” Morris said. “It’s a problem that’s not going away.”
It’s a similar story in Florida, where insurance rates tripled over the last three years. On the ultra-exclusive Star Island, homeowners are now paying upwards of $600,000 for annual policies due to climate risk factors. There are implications for other states as well. Across the country, premiums have surged 23 percent since January 2023, CNBC reported. Both the Midwest and Southwest are among the areas where rates have risen the most, according to a report by Bankrate. Nebraska, Oklahoma, and Kansas were among the most expensive states for homeowners insurance, per the analysis, and in Louisiana, the average premium shot up 63 percent compared to last year due to hurricane risk.
“Insurance is where many people are feeling the economic impacts of climate change first,” Carolyn Kousky, associate vice president for economics and policy at the Environmental Defense Fund, told The New York Times. “That is going to spill over into housing markets, mortgage markets, and local economies.”
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