Today, we’re diving into a critical topic for all homeowners: homeowner’s insurance. Did you know that one in eight homeowners in the United States either don’t have homeowner’s insurance or lack adequate coverage? That’s a staggering statistic when you think about it, especially considering the financial risks involved.
The Growing Cost of Homeowner’s Insurance
Let’s start with the rising costs. Over the past five years, we’ve seen insurance rates skyrocket—especially in states like Florida. In fact, homeowners in Florida have experienced a 200% increase in premiums, with the average cost now sitting at $6,000 a year. That’s about $500 a month, which is almost like paying another property tax. No wonder it’s getting harder for people to afford it.
Across the country, about 13.4% of homeowners are unprotected by homeowner’s insurance, and in the South, that number jumps to 15.7%. Not having insurance is particularly dangerous if you still have a mortgage because, believe it or not, your mortgage company can force you to purchase insurance. And guess what? That forced insurance is often much more expensive than if you had bought it yourself. This can dramatically increase your monthly costs.
A Quick Tip to Manage Costs
Here’s a quick money-saving tip: if you’re finding homeowner’s insurance too expensive, consider opting for a higher deductible. This can reduce your monthly premiums, helping you save in the long run. For instance, if your home is worth $500,000 and you only have $250,000 in coverage, it’s not ideal, but it’s better than nothing. Just keep in mind, your mortgage company might force you to purchase additional coverage if they feel it’s inadequate.
Catastrophes and the Uninsured
One of the worst situations you can face as a homeowner is being uninsured when disaster strikes. Think about hurricanes, wildfires, tornadoes—these can cause massive damage, and without proper coverage, recovering can feel next to impossible. Even if you manage to rebuild, the financial burden can be overwhelming.
But it’s not just about your house. Insurance claim payments benefit more than just the homeowners. For example, if your car is damaged, that payout goes toward repairs at your local auto shop. Similarly, claim payments can help rebuild homes, cover medical treatment, and even benefit contractors and home improvement stores. So, if you don’t have insurance, you’re not only putting yourself at risk, but also missing out on the broader support network insurance can provide.
Bundling for Savings
Here’s another tip: bundling your home and car insurance can help you save. Many insurance providers offer discounts if you combine your policies. I personally used to have my insurance through Costco, but with rising costs, especially as my kids started driving, I had to explore other options.
Real-Life Experience with Insurance
Last year, in 2023, we experienced some crazy weather in my neighborhood—strong winds, snow, hail, and all. Several trees fell, and parts of my house’s siding were damaged. Luckily, I had homeowner’s insurance, so the repairs didn’t cost me much. But if I hadn’t been covered, I would’ve easily been out a few thousand dollars.
High winds and rain are common issues here in Oregon, so keeping up with home maintenance is key, especially if you want to avoid water damage. And remember, even if no one gets hurt, repairs to your home can still be costly without insurance.
The Escrow Factor
One thing you should know: it’s a good idea to have your insurance rolled into your escrow account. That way, it’s all taken care of along with your mortgage, property taxes, and other fees. Just make sure to keep an eye on your statements because costs like property taxes or insurance premiums can sometimes increase beyond what’s held in escrow. If that happens, you could face issues with your mortgage lender, which may even start a foreclosure process if you’re short on payments.
Special Insurance Considerations: Earthquake and Flood Insurance
One type of insurance I’ve personally been thinking about adding here in Oregon is earthquake insurance. We’re expecting a major earthquake sometime in the next 50 years, and the cost for earthquake coverage ranges from $1,000 to $2,000 a year. It’s something many homeowners are rolling the dice on, but it’s definitely worth considering.
If you’re in an area prone to flooding, like near a river or creek, flood insurance might also be necessary. In some cases, mortgage companies will require it. Be sure to ask the seller or your agent if the current owner is paying for flood insurance—it could add another $1,500 to your yearly costs, or about $100 a month.
Conclusion: Always Check Your Coverage
To sum it all up: having homeowner’s insurance is essential. Whether you’re buying a new home or reviewing your current policy, make sure you’re adequately covered. Talk to your insurance agent, mortgage company, or real estate agent to find out what you need. Don’t forget to factor in other possible costs like flood or earthquake insurance, depending on your location.
When you’re budgeting for your home, remember to include homeowner’s insurance, property taxes, mortgage insurance, and any other necessary coverages. It all affects your monthly affordability.
If you’re in the Portland, Oregon market and considering selling your home, feel free to reach out. I’m here to help and happy to guide you through the process.
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Disclaimer: The content in any of Shawn Yu (Shawn Realty) Youtube videos or this website shall not be construed as tax, legal, insurance, construction, engineering, health & safety, electrical, financial advice, or other & may be outdated or inaccurate. Shawn Yu/Shawn Realty is a licensed principal real estate broker/brokerage doing business in Oregon. To contact Shawn Realty for selling, buying investing in Oregon, please email shawn@shawn-realty.com or call 503-515-4499.
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