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Saturday, June 15, 2024
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Homeowners’ Insurance Fix

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Homeowner’s insurance was not much of a problem before National Flood Insurance started about 50 years ago. For decades, that insurance has encouraged a lot of building in risky, low-lying areas. It has never collected enough in premiums to cover the billions in losses, so those costs are being transferred to other homeowners and taxpayers, worsening the problem.

As private insurance companies dropped anyone that they saw as risky, Citizens was formed as an insurer of last resort. It has also failed to collect enough to cover losses, so other homeowners are unfairly assessed to pay the shortfalls, worsening the problem. Price controls are no solution because businesses fail when outflow exceeds income.

My recent policy renewal notice was $3,000 higher than last year. When I asked why, they said it was mostly due to their losses from wind damage. I told them I would not renew at that price, because my home design does not need wind coverage. Surprise! They then offered me the same policy, without wind coverage, for just $670, saving me about $4,000.

I think the lesson here is that it has become more practical to build or harden your home to withstand a Cat 5, rather than spending ever-increasing thousands of dollars every year to insure and subsidize homes that can’t tolerate a Cat 5. By self-insuring, you also have instant access to your own money to use for anything, instead of waiting months or years to settle a claim, if ever. Meanwhile, your home may not even be livable until repaired.

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You probably will not be allowed to cancel your policy if you have a mortgage, but you could sell and put your equity into something smaller and stronger. I avoided a mortgage by building my own home. You can effectively save or earn about $100 an hour that way instead of paying contractors with your after-tax earnings.

Government “solutions” involve taking from everyone and giving to others, which fuels and worsens problems by ignoring root causes. If your personal cost of living rises 15% due to government “solutions”, you have effectively been taxed 15% in addition to all the other taxes you pay. How many more government “solutions” can you afford? Is it worth losing your home so that others can keep theirs?

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