How to Navigate the Crippling Home Insurance Crisis
Money For the Rest of Us
J. David Stein
4.3 ⢠1.3K Ratings
đď¸ 5 June 2024
âąď¸ 31 minutes
đď¸ Recording | iTunes | RSS
đ§žď¸ Download transcript
Summary
Why are homeowners seeing home insurance premiums increases of up to 70%, as David has? What can you do if your insurer drops you, you get a huge premium increase, or you can no longer afford coverage?
Topics covered include:
- What are the primary drivers of home insurance price increases
- Why these increases don't show up in the U.S. consumer price index
- How the reinsurance market works and why reinsurers are passing on 50% premium increases to property and casualty insurers.
- What percentage of home insurers self-insure
- What else can homeowners do
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Show Notes
The crippling home insurance crisis hitting America by Rana ForhooharâThe Financial Times
The Hidden Driver of Soaring Home Insurance Costs by Jean EagleshamâThe Wall Street Journal
When Disaster Strikes: Preparing for Climate Change by SeĂĄn Nolan and Krishna SrinivasanâIMF Blog
Homeowners Perception of Weather Risks 2023 Q2 Consumer SurveyâInsurance Information Institute
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Transcript
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| 0:00.0 | Welcome to Money for the rest of us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. |
| 0:10.0 | I'm your host David Stein. Today is episode 481. |
| 0:13.5 | It's titled, |
| 0:14.4 | How to Navigate the Crippling Home Insurance Crisis. |
| 0:19.7 | In the fall of 2020, |
| 0:20.9 | Laplo and I tried to take out a mortgage for a house we wanted to purchase. |
| 0:25.7 | We hadn't had a mortgage in over a decade, but 30-year mortgage rates were less than 3%. So the offer was too good to pass up. We started |
| 0:36.2 | working with a mortgage broker that was recommended by our realtor in Phoenix |
| 0:41.5 | and the whole process went on for months and we never got a |
| 0:45.7 | mortgage we never got an approval. Turns out that the agencies in the US that purchase most of the mortgages and package those mortgages into |
| 0:58.4 | mortgaged-backed securities or bonds, they change the rules, added new requirements for the self-employed because of the |
| 1:07.5 | pandemic. |
| 1:08.5 | They wanted to make sure that self-employed people still had income to pay their mortgages because 70% of home mortgages in the |
| 1:16.3 | U.S. are bought by Fannie Mae and Freddie Mac. |
| 1:20.8 | Those agencies guarantee the mortgages that are passed. those agencies |
| 1:23.0 | that are packaged into these bonds. |
| 1:26.0 | So if there's a default on the mortgage, |
| 1:29.0 | these agencies which are owned by the US government |
| 1:32.0 | at this point have to basically make up the default or |
| 1:37.1 | any shortfall if the house is sold and there's not enough to cover the mortgage that is packaged into this bond. |
| 1:44.0 | After several months of not getting an approval, |
| 1:47.0 | we went to another mortgage broker we knew that was a member of money for the rest of his plus. After a couple months we had a |
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