Fire Insurance For Homes With Aging Heating Systems: Mitigating Hazards

Fire Insurance For Homes With Aging Heating Systems: Mitigating Hazards – As a money management expert, Eric Diton helps his clients solve complex personal finance issues. But he finds that more are frustrated by a surprisingly mundane budget item: home insurance.

“I can definitely say that for my Florida clients, it’s a topic of conversation and on their radar,” said Mr. Deaton, president of Wealth Alliance, an investment advisory firm. “They see the cost of their insurance going up.”

Fire Insurance For Homes With Aging Heating Systems: Mitigating Hazards

Mr. Deaton, who splits his time between Boca Raton, Fla., and Long Island, said he found himself in the same boat. “Personally, my insurance company raised my premiums quite a bit,” he said of his Florida home. “It was quite challenging to find a lot of choices, and that resonated with a lot of people in this state.”

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While Floridians aren’t the only ones struggling with this problem, the state’s popularity among retirees means it’s a problem more and more will face, experts say. When budgeting for living on a fixed income, most future retirees think about services and goods, such as doctor visits or prescription drugs, that are likely to cost more in the future. Almost no one thinks about home insurance – insurance experts warn that omission will be an increasingly expensive mistake.

Many Americans’ plans to retire in a coastal Sunbelt state or a picturesque mountain hamlet are at odds with extreme weather conditions – and the property damage that follows.

“In some regions we are already seeing changes in weather patterns, most likely driven by climate change, which are already having an impact,” said Ernst Rauch, chief climate and geoscientist at reinsurance company Munich Re.

After absorbing punitive losses from floods, hurricanes and wildfires in recent years, many insurers are re-evaluating their risk modeling practices. The consequence for many homeowners is higher property insurance bills. Others may find themselves struggling to get a policy at any cost.

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“In certain parts of the country, the insurance situation has been really tough — especially in Florida and that area, including Louisiana and the Gulf states,” said Nancy Albanese, vice president of personal insurance at BMT Insurance Advisors. “Another market that is very difficult is California and some of the western states that are exposed to wildfires.”

She added, “When we come across a client in Florida who needs insurance, we know it’s going to be a big challenge.”

Karen Collins, assistant vice president for personal lines for the American Property Casualty Insurance Association trade group, said she and her colleagues have seen “a very significant increase in losses recently.”

This trend increases premiums. According to AM Best, an insurance industry rating and analytics firm, the total amount of homeowner’s insurance premiums Americans paid rose 8.4 percent between the third quarter of 2020 and the third quarter of last year. (A spokesperson for AM Best noted that this aggregate snapshot does not reflect what any individual policyholder paid.)

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Ms. Albanese said an insurer recently dropped one of her clients, who was already paying $22,000 a year to insure property on the Florida coast. After some scrambling, Ms. Albanese was able to find the client coverage through a “surplus lines” provider — the insurer of last resort for the highest-risk policies — but at double the price.

“It’s been years of back-to-back rate increases and I can think of at least one client who said he was planning to sell his property in Florida just because it was becoming unheard of to insure,” Ms. Albanese said. . “I’ve also had clients recently who were buying real estate in Florida, unaware of what the insurance market was like down there and they were really shocked – they just didn’t realize how high their premiums were going to be.”

Mr Diton said the rising cost of property insurance – particularly combined with higher property taxes in areas where home values ​​have risen significantly – is particularly relevant for clients considering buying investment properties to generate passive income. This strategy is popular among retirees and even some younger investors.

When a client is interested in a property, Mr. Diton said he will create a spreadsheet and analyze the costs. In some cases, potential customers decide to abandon the purchase. “The increase in home insurance is definitely adding to the problem for those people,” he said.

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A house in Ponte Vedra Beach, Florida was boarded up in preparation for Hurricane Dorian in 2019. Credit… Johnny Milano for The New York Times

Insurance professionals working away from the East Coast report similar market conditions. “What we’re seeing is companies that specialize in insuring homes along the coast are going out of business, so we don’t have as many options,” said Robin Jaekel, vice president of personal lines at Glenn Insurance, a New Jersey insurer. an agency that does significant business along the Jersey Shore. “Costs for homeowners along the coast have definitely been affected.”

Hurricanes and northeasterly winds are the main reasons insurers are fleeing the market, Ms. Jaekel said. A recent overhaul of the federally subsidized National Flood Insurance Program adds to the headaches — and costs — for property owners whose mortgage holders require flood insurance as well as home insurance.

In many cases, the only policy a homeowner can obtain is one that limits the amount of compensation someone can expect to receive after the worst storms. “We now have a ‘stated hurricane deduction’ on all the shelves here,” Ms. Jaekel said. “If it’s a named hurricane, they have a special franchise just for that.”

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Extreme weather experts say stories like these are likely to become much more common in a rapidly warming future. “Hurricanes along the US East Coast are also moving north,” Mr. Rauch said. “The probability increased in the northern regions of the US as the water warmed.”

“This is a big, long-term problem for every developed area of ​​the United States,” Jim Blackburn, professor of environmental law and co-director of the Center for Severe Storm Prediction, Education and Disaster Evacuation at Rice University, said via email.

He added that while coastal regions are likely to face some of the biggest challenges from more intense storms, increasing rainfall means that even homes located near – rather than within – floodplains could also become more vulnerable. “We have not begun to understand the impacts of climate change on settlement patterns,” he said.

The rising cost of extreme weather claims comes on top of a host of other factors that drive up the cost of home insurance. Supply chain bottlenecks and labor shortages are making it more expensive to repair or rebuild homes after a disaster, while trends in home construction and design are also to blame, insurance experts say. In neighborhoods with older housing stock, rebuilding after a natural disaster could be more expensive due to measures to bring the property up to current building code standards.

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“Building materials themselves cause catastrophic losses,” said Jared Carillo, director of foundation accounts at SmithBrothers, a Connecticut insurance brokerage. Materials used in construction today include more synthetics that burn faster and hotter, such as particle board, spray foam and wire insulation, he said.

Open floor plans are another culprit, Mr. Carillo said: “A fire that starts in the kitchen will cause more loss on the first floor.”

Some of the weather changes tracked by the insurance industry, such as the northward shift of “Hurricane Alley,” are gradual changes. Others — such as the droughts that have exacerbated massive wildfires in the western United States — reached the tipping point much more quickly. Mr. Rauch said that in the 1980s, average annual insured losses in the United States from wildfires ranged from $1 billion to $3 billion.

That changed in the blink of an eye. “In 2017, for the first time, insured losses were somewhere in the region of $16 billion,” Mr. Rauch said. “It was a huge jump, and 2018 was basically the same.” After a moderate wildfire season in the West in 2019, 2020 brought another round of staggering losses, roughly around $11 billion.

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It’s proof that even the most nimble companies can be surprised by how quickly conditions change. In just the last four to five years, Mr. Rauch said, wildfires have brought significant changes. “The loss situation was completely different than decades before,” he said.

Insurance and real estate experts say that’s especially problematic for people who put down roots decades ago expecting to grow old in those homes and neighborhoods, only to find the ground has shifted.

“I have people who have retired here,” said Patrick Brownfield, personal risk advisor for insurance broker Hub International in Jackson, Wyo. “They’ve had astronomical increases in insurance over the last two years,” he said, adding that leaves homeowners with few options. “It’s going to cost them $20,000 a year on their fixed income, and now they can’t pay for insurance because all their equity is in

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