Insurance: Arguably More Important Than Rate

Orion doesour best to give our clients the best products, service, and price on homeloans for your clients. But increasingly there are things out of our control,and our broker’s control, that impact our client’s ability to obtain financing,and one of the biggest is the cost of homeowner’s insurance. And the problem,usually specific to each state, is not going away, or even lessening.

Millions of American homeowners are shouldering the burden of surging insurance rates, and will continue to do so, in part due to worsening climate disasters. Their premiums are rising as insurers struggle to cover the increasing cost of rebuilding after disasters, most recently seen with hurricanes Milton and Helene.

It’s another alarming sign for the future of America’s homeowners’ insurance market. In the last few years, major insurers have pulled out of or stopped writing new policies in California, Florida, and Louisiana, in part citing increased climate risks like more destructive wildfires and stronger hurricanes. But the problem is not confined to those states as flooding has been seen in nearly every state. The insurance industry is only just beginning to price the cost of climate change into its premiums and will continue to respond to the increasing climate damages.

For Orion’s brokers and your clients and homeowners in many places, this also means fewer choices between companies as private insurers pull out of high-risk areas or restrict coverage. Millions of properties, mostly in California, Florida, Louisiana, and Texas, have already experienced price surges or have been dropped by insurance companies. At this point it’s hard to identify a part of the country that that’s not impacted or won’t be impacted, and millions more U.S. homes are at risk of flooding than previously known.

While this dynamic is just starting in the private insurance market, the price shocks already came for homeowners in the federal government’s flood insurance program. Premiums on federal flood insurance, known as the National Flood Insurance Program, increased significantly starting in 2021 as the federal government adjusted for the cost of stronger storms and these price increases have continued through 2024.

Orion’s brokers know that when a homeowner’s insurance, or potential insurance doubles or trips, those finances don’t make sense to many people. Faced with higher premiums, some homeowners who don’t carry a mortgage are choosing to for go insurance altogether, leaving them unprotected if a disaster hits. There are larger economic implications down the road, when homeowners who have taken a higher premium try to sell their house and find they are short of buyers. The lack of affordable insurance is impacting home prices. If you’re a homebuyer, you’re going to ask the question, “What’s it going to cost me to insure this place, and can I get insurance?” If the answer is insurance is really expensive and hard to get, then homebuyers are saying, “I’m not going to pay as much for this house, because it’s simply not worth as much.”

When you talk to your client about financing, make sure that insurance is part of the discussion. It will help them, and you, in the long run.