Although inflation is a factor, some states have higher property insurance premiums than the national average and the current inflation rate. According to a Forbes article, Oklahoma, Louisiana, Mississippi, Texas, and Nebraska are the top five states with the highest property insurance rates. The maximum premium rate has risen to over $3,500, with some states experiencing a premium increase as high as 18% on a year-on-year basis.
A McKinsey report claims that the insurance industry has lost more than $30 billion due to inflation. These figures and facts are certainly cause for thought.
So, what is behind the rising rates? Let us take a quick look:
Extreme Weather Conditions
According to recent news reports, twelve people were injured when seven tornadoes struck Oklahoma. The same news came for Michigan, which may experience significant snowfall, and Kansas, which saw two tornadoes in quick succession. This year, we have seen Southern California experience blizzards for the first time in decades. America experiences some of the most extreme weather, with one state being flooded and another being covered in snow.
These states stop being functional due to frequent power outages, tornadoes, hurricanes, floods, and snowstorms, which raises insurance costs. Over the past few years, there has been an increase in the number of insurance claim requests because of these extreme weather conditions.
Increasing Material Prices and Shortages
According to an NAHB survey, 90% of respondents said there was a supply shortage. Following a thorough analysis, it was discovered that there was a severe shortage of over 57% of appliances, 54% of OSB, and over 48% of plywood. These figures make it crystal clear how serious the supply chain disruptions are. This shortage raises material prices, which increases the building’s overall value and drives up insurance premiums because any repairs needed after an accident will be costly.
Even though the cost of property insurance is higher in many US states, people still need to insure their homes. Let us take a look at why this is still necessary.
Why Is Property Insurance Still Necessary?
Ensuring Protection Against Any Liability
Having property insurance is a great way to be completely protected from any liabilities that might arise on the property. These can include someone slipping and hurting themselves on the property or getting bit by the homeowner’s dog, among others. Such situations may result in lawsuits, and as such, the property owner would be responsible for any harm done to the victim – thus liable to pay for the losses, mental, physical, or otherwise.
If a suitable property insurance plan is chosen, the insurance provider will settle these payments, giving protection to the property owner against such liabilities.
A Requirement by Mortgage Lenders
Another critical need for taking property insurance is that your lender requires you to do so. Property insurance must be purchased against the building if your property is being financed by a mortgage lender. This is done to ensure that the location for which they are lending the money is properly insured and that any necessary repairs will be made up till the loan is fully repaid.
Lenders may even demand that borrowers take these safety precautions in order to fully protect their investment or even pass a loan.
A Way to Avoid Financial Losses
Any accident, whether caused by nature or man, can result in substantial financial losses if the property is harmed. It is challenging to bear the enormous financial loss that personal or commercial property can accrue without adequate coverage.
The cost of managing the property can cause a person to lose all their wealth, whether it pertains to repairs, expensive items being lost to fire or theft, or the need to rebuild the entire area. With the proper coverage, homeowners can protect themselves from suffering significant financial losses by not having to pay for any damage repair.
Considering how quickly the social and economic landscape evolves, property insurance, whether commercial or residential, gives people a sense of relief. In the US, purchasing property insurance is not required by law, but doing so is unquestionably a wise move to protect against financial loss or, worse, bankruptcy.
How Can the Right Insurance Agency Help?
Your property insurance is assessed based on the level of coverage, the deductible, the coverage limit, the area, and the state of the house. All these elements affect the cost of the insurance premiums and decide whether additional coverage is necessary. Often, most homeowners are underinsured, and when they file a loss claim, they do not receive a fair assessment of the damages.
When it comes to fully insuring your property, finding the right partner who takes part in careful risk assessment and property evaluation is necessary. Gonzalez Insurance has long been providing individuals with insurance advice and policies based on their specific needs and property requirements. Our experts do a thorough portfolio assessment and recommend the best coverage for complete security. Get in touch with us to receive a customized quote for all your property needs.