In August of this year, Hurricane Debbie wreaked havoc across the southeastern coastal states, inundating numerous oceanfront luxury homes in a matter of hours. With natural disasters becoming increasingly frequent due to extreme weather patterns, these coastal properties are now considered high-risk real estate zones. This shift has resulted in soaring insurance premiums, and in some instances, outright denial of coverage. Homeowners aiming to sell their properties now find themselves in a precarious situation, struggling to attract buyers.
A recent report from The Wall Street Journal highlights the challenges faced by Ryan Harper and his wife, who encountered a staggering 100% increase in their property insurance premiums for their luxury home in Santa Clarita, California. With annual insurance costs surpassing $7,000, they made the difficult decision to list their home for $1.25 million last year. However, even after a price reduction of $75,000, their six-bedroom Spanish-style mansion, situated in a fire hazard zone, has gone months without any buyer interest. “Selling a home in California right now is more daunting than ever,” Harper lamented. “The insurance costs have just skyrocketed.”
Statistics from Citizens Financial Group in Rhode Island indicate that insurance premiums for properties with mortgages exceeding $1.5 million have surged by 130% from mid-2020 to mid-2024, while premiums for homes with loans ranging from $400,000 to $800,000 have seen a more modest rise of 12%.
The recent devastation caused by Hurricane Helene, which resulted in an estimated $26 billion in damages throughout the southeastern states, has led numerous insurance companies to withdraw from disaster-prone real estate markets in Florida and California, or to deny coverage altogether. Eric Schuppenhauer, the former consumer lending chief at Citizens Financial Group, noted, “If you’re in the insurance business, you’re seeing a three-fold increase in risk overnight.”
Consequently, insurance providers now favor underwriting four homes valued at $250,000 each rather than one million-dollar luxury property. Paulette Koch, a luxury real estate agent in Palm Beach, confirmed that she has received numerous inquiries from clients concerned about the dramatic rise in premiums, which she describes as an unavoidable aspect of the cost of living.
Dale Porfilio, the chief insurance officer at the Insurance Information Institute, acknowledged, “The insurance industry is increasingly hesitant about high-end homes due to the significant risk of loss from natural disasters, making heavy investment in these properties impractical.”
Sandra Beckett and her husband were taken aback when they discovered that the insurance premiums for their older home in West Palm Beach, Florida, exceeded $8,000 annually. They opted to sell less than two years after purchase, with Beckett stating, “Honestly, I don’t think I’ll buy another house in Florida.”
Meanwhile, Katja Pekrun, who owns a $1.2 million home in Menlo Park, California, is determined to pay off her mortgage quickly to avoid the escalating insurance premiums. “I might just give up on homeowners insurance entirely because it’s simply too expensive and outrageous,” she expressed.
