Homeowners Struggle As Insurers Drop Coverage Amid Economic And Climate Challenges

Having home insurance was once a necessity, but due to the current economy and pressing factors like climate change, more and more homeowners are finding themselves dropped from current providers without the budget to renew anywhere else.

For Jamie Lafollette, news that she was being let go from her State Farm policy after she stumbled across a story that the insurer was pulling out of Santa Cruz County.

It wasn’t long before she was on the line with her agent to discover that her plan would lapse, which sparked the search for a replacement policy—one that Lafollette says has been both a difficult and ongoing process, The Washington Post reports.

“Our first quote came in at over $10,000 a year, and that was bare-bones coverage,” she explained. “And then I kept pressing, contacting other brokers…contacting all these weird companies you’ve never heard of.”

Lafollette, who lives in Soquel, California, near Monterey Bay, revealed that because her home is also surrounded by a forest, posing the ever-growing threat of wildfire, homeowners insurance essential. However, with quotes for insurance in the area ranging from $17,000 to $25,000 annually, the costs are well out of her budget.

“I’m at the point where I don’t know if I can keep my home,” said Lafollette.

According to State Farm, the aforementioned cancellation amounts to 2 percent of policies in the state, meaning Lafollette only has a few good options to select from when it comes to keeping her home insured, but she isn’t alone.

A 2023 estimate reported by the industry group Insurance Information Institute found that 12 percent of homeowners did not have coverage in 2022. In 2019, that number was 5 percent. 

Moreover, a March 2024 report by the Consumer Federation of America (CFA) found uninsured homeowners sitting at 7.4 percent. That number is based on 2021 data by the American Housing Survey, which is pulled every two years. According to CFA’s director of housing, Sharon Cornelissen, an updated report will boost that percentage when 2023 numbers are disclosed.

To make matters worse, some insurance providers have begun pulling out of disaster-prone areas, citing climate change and rising payouts as a reason for leaving former policyholders without coverage and fewer and more expensive options when it comes to finding coverage.

Because of this, homeowners like Lafollette say that they aren’t just going insured by choice. Discontinued policies and the inability to find alternatives leaves them with no other option.

“It’s very unrealistic for any homeowner to think they can pay for catastrophic losses out of pocket,” said Mark Friedlander, director of corporate communications for the Insurance Information Institution.

With lenders requiring mortgage loan applicants to carry insurance, the rise in homeowners who have decided to forgo coverage has raised a few concerns. In the worst case scenario, Friedlander said that when a homeowner decides to halt payments on a policy, it may be considered a form of default, even leading to foreclosure.

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