Skyrocketing Homeowners Insurance? - Senior Planet from AARP

The news has recently been filled with people shocked by big price increases in their homeowners insurance.The largest increases have followed natural disasters in parts of Florida and California, but the price hikes have affected homeowners across the U.S.Nearly half (47%) of homeowners said their insurance has experienced a premium increase in the past year, the highest rate of increases in more than a decade, according to theJ.D.Power2025 U.S.

Home Insurance Study.Separately, data from ICE Mortgage Technology says that costs for homeowners insurance have risen 70% in the past five years.More price hikes are coming.Home insurance premiums are expected to increase by an average of 8% in 2026 and nearly 30% over the next 30 years, according toLexisNexis Risk Solutions, in its recently released 10th annualU.S.

Home Trends Report.The trend has changed how some people plan for and pay for home insurance.Location, location, locationThe same rules that apply to real estate now also apply to home insurance.Today location may not only determine price, but availability.Mitch Katz, financial planner and partner at Capital Associates in Bethesda, Maryland, says Covid led to people selling homes and seeking lower-cost alternatives in smaller communities, especially in Florida, Texas other states with no income tax.But some of those savings have been eaten up by rising costs for homeowners and car insurance.

Its increased everywhere, but its really in the places that benefitted most (by Covid), he says.All of a sudden, youre not necessarily saving money.And homeowners insurance is a large part of that cost.The skyrocketing rate increases have left some families looking for less costly alternatives and others unable to pay for insurance at all.

There are options, but some will only work for high-income individuals.Cancel your insurance?Katz says he had to talk a client out of cancelling his homeowners insurance, telling him it was a bad idea.You cant necessarily not have homeowners insurance, he says.I dont want to say its rare, but its a specific use case.

Almost all mortgages or banks, require you to have the insurance.You cant just drop it.They mandate the insurance to protect themselves.

So very few people have that.In the case that this particular client, the cost had gone up so much (it tripled in five years), they just said, we have limited dollars, he says.Maybe well just get rid of it.They were looking at and trying to control some of the costs that they had not anticipated.

But their homeowners association actually required them to have the insurance.Consider a higher deductibleSome financial planners say homeowners with a fully funded emergency fund can reduce premiums by taking on more risk.Many homeowners have deductible that are two low relative to their finances and liquidity, some financial planners say.Higher deductibles shift more risk to the homeowner, but they could result in reduced premiums and cost savings.

Homeowners should review deductibles regularly when they review their finances and renew their policies.Put rising insurance costs in your financial planIn your financial plan living expenses increase annually at the rate of inflation.Mortgage expenses are generally fixed.Homeowners insurance and taxes used to be in the plan at the rate of inflation, But now, especially for my clients that live in states like Florida, California, we increase (insurance) projections at a much higher rate so that we know that were going to need more money for that expense later, says Katz.Now we project that at a much higher rate than everything else because of what were experiencing, he says.

Self-insureThis is not an option for most.And it may not even be an option for higher-income people who can afford to try it.People can self-insure outright, meaning that they dont take insurance at all, says Katherine Frattarola, executive vice president and Head of HUB Private Client at HUB International.But in those cases, those folks dont have a mortgage, because most lenders require you to have some amount of insurance.So, the way that those with a mortgage would think about self-insurance is, for example, with higher deductibles, she says.

Sometimes, when the term self-insurance is thrown out there, people assume they dont have any insurance at all.That is one way to look at it.But I still may have insurance, but Im going to have a higher deductible.

Im going to have a $25,000 deductible versus a $5,000 deductible, which would mean that the first $25,000 of risk is on you as the homeowner.Or you may say, I am deciding that Im going to get a policy without wind coverage, or I am not going to purchase flood insurance, she says.In those situations, its also a type of self-insurance, because what youre saying is, in the event of a flood or in the event of wind damage, I, as the homeowner, am going to be responsible for that risk.Frattarola says she advises clients is based on their risk profile, their risk appetite or their lifestyle.In some cases, it may be taking a higher deductible.

In some cases, it may be, if you have a balance sheet that could sustain a total loss, and you have the stamina to marshal your own resources to get back on your feet in the in an event of a catastrophic loss, then we may advise you that you should fully self-insure.But, if you choose this option, make sure you have the time, patience and resources you need to manage rebuilding after a disaster, she says.Youre going to have to marshal the folks who are responsible for excavation, remediation, etc., she says.The carriers have leverage because they insure thousands of homeowners and they have relationships with vendors.YOUR TURNHow has rising home insurance costs impacted you? How do you handle it? Let us know in the comments!Rodney A.

Brooksis an award-winning journalist and author.The former Deputy Managing Editor/Money at USA TODAY, his retirement columns appear in U.S.News & World Report and SeniorPlanet.com.

He has also written for National Geographic, The Washington Post and USA TODAY and has testified before the U.S.Senate Special Committee on Aging.His book, The Rise & Fall of the Freedmans Bank, And Its Lasting Socio-economic Impact on Black America was released in 2024.

He is also author of the book Fixing the Racial Wealth Gap.His website iswww.rodneyabrooks.comYour use of any financial advice is at your sole discretion and risk.Seniorplanet.org and Older Adults Technology Services from AARP makes no claim or promise of any result or success.