Finance guru Suze Orman has warned the effect of climate change on soaring property insurance premiums is destroying the American dream of homeownership.
The 72-year-old has given up on cover for her own 2,100-square-foot, ocean-side condo in Florida after she was quoted $28,000 a year by her insurer.
Orman claims that Americans will soon have little interest in owning homes as insurance costs make them too unsustainable to maintain. In turn this could cause real estate prices to fall.
Last year, the US experienced 28 natural disasters which each cost at least $1 billion, according to the National Oceanic and Atmospheric Administration.
As a result, the national average price of home insurance has shot up by 23 percent to $1,759 a year between January 2023 and 2024, figures from Bankrate show.
Finance guru Suze Orman (pictured) has warned the effect of climate change on soaring property insurance premiums is destroying the American dream of homeownership
The amount of money paid out by insurance companies to cover damage caused by extreme weather – such as wildfires and hurricanes – has been steadily increasing since 2000
A view shows a burning house as the Fairview Fire near Hemet, California, U.S., September 5, 2022. WIldfires have pushed up costs for insurers – who have put up premiums
Orman told DailyMail.com: ‘Climate change is going to make a big difference in people’s desire to own their own home.
‘Look at what’s happening in Southern California. Look at the devastating hurricanes that are coming to places where hurricanes really weren’t so prevalent before. I think people start to get a little frayed, especially with interest rates on mortgages being where they are.’
She added: ‘Real estate is unpredictable. I never would have thought to advise homebuyers ‘oh you better make sure that you can afford a quadrupling of property insurance in the future.’
In the US, buyers cannot take out a mortgage without also buying home insurance.
But Orman owns her Florida condo outright – meaning she was able to give up on the cover.
She said: ‘I’m not paying $28,000 a year when the insurer will probably contest any claim I get anyway. Luckily, I have the money to self-insure.
‘$28,000 for a 2,100-square-foot condo. Are you kidding me?’
Marta Cross had to pay more than $4,000 a year for home insurance in Los Angeles
Extreme weather events – such as hurricanes, floods and tornadoes – have become increasingly commonplace in the US. Data from the US Census Bureau shows such events forced an estimated 2.5 million people out of their homes.
Higher construction costs have also made repairs more expensive causing insurance premiums to spiral.
And some insurers are pulling out of disaster-prone areas altogether.
Last year, America’s biggest home and car insurance company State Farm announced it would no longer insure homes in California, saying that the risk from wildfires was too great and the cost of rebuilding too high.
According to S&P Global, State Farm reported a loss ratio of 84 percent in the first nine months of 2023, up more than 20 percent from 2022.
Insurers pulling out of California affected actress Marta Cross and her musician boyfriend – who faced big home insurance bills last summer when they bought a home in LA.
The purchase nearly fell apart when she was unable to get cover from any of the private-sector companies. With no private insurer willing to provide cover, she had to the sate’s insurer of last resort. It all came to $4,000.
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. Severe weather has affected insurance premiums
Orman owns her Florida condo outright – meaning she was able to give up on the cover
A recent study by Bankrate laid bare America’s home insurance lottery which means residents in some states have to pay double as much as those in others.
Its findings showed homeowners in Nebraska, Oklahoma and Kansas face the highest bills while Louisiana was suffering from the fastest-rising premiums.
Louisiana has been hit by hurricanes, severe storms and floods in recent years.
According to Bankrate, Americans can reduce the cost of their home insurance by bundling their auto and home policies and understanding the different types of home coverage types and finding the right one.
Improving your credit score can also help, and it could be worth simply asking your provider for a discount, for example if you have installed a new home security system.
Another option is increasing your home insurance deductible, but experts warn there are risks to this method.
Your deductible is the amount of a claim you are willing to pay out of pocket. Most homeowners insurance policies have a minimum $1,000 deductible.
The higher your deductible, the lower your premium, but the more you will pay out of pocket if you file a claim.
Deductibles have become a very big issue,’ Charles Nyce, an associate Professor of Risk Management and Insurance at Florida State University’s College of Business, told DailyMail.com.
‘But it’s dangerous, there will be people who have losses they cannot afford to have.’
