Landlords Grapple with Rising Insurance Costs Amid Housing Market Shocks

Rising Insurance Costs: As if the housing market needed another hurdle, landlords now face a growing insurance crisis. Property insurers are increasingly limiting policies, tightening underwriting criteria, and in some cases, withdrawing from markets entirely or significantly raising rates.

States like California, Florida, and Texas are particularly hard-hit, and the trend is spreading nationwide, exacerbated by extreme weather events. Small landlords are bearing the brunt of this turmoil.

The Landlords’ Insurance Anxiety

A recent survey by ResiClub and Groundfloor revealed that 80% of landlords are worried about rising insurance premiums. This survey, involving 224 landlords of short-term and long-term rental properties, highlights the widespread anxiety among property investors. Lance Lambert, co-founder and editor-in-chief of ResiClub and former real estate editor for Fortune, spearheaded the survey .

George Haralampopulos, a landlord in Fort Lauderdale, experienced this firsthand. After purchasing a property during the pandemic boom, he began renting it out. Recently, his insurer reassessed the property, causing his monthly insurance and property tax payments to soar by $600 to $700.

“It’s something that definitely gave me some sticker shock,” Haralampopulos said.

Despite the increased costs, he chose not to raise his tenant’s rent, absorbing the financial hit himself. This decision leaves him with less income for property improvements and adds to his concerns about future hurricane seasons and potential further hikes in insurance costs.

Also read: Landlords and Investors Reap Rewards as Soaring Home Prices Sideline Buyers

Adjusting to New Realities

The insurance crisis isn’t confined to coastal states. Joshua and William Lemmon, twin brothers and property owners in Ohio, also face challenges. The brothers, who bought a portfolio of properties, have had to navigate stricter insurance requirements.

William, an insurance broker, noted the increasing pickiness of insurers. They’ve had to accept higher deductibles, reduce coverage, and even undertake significant property repairs to maintain insurance coverage.

“We had to replace roofs and plumbing to counter higher rates,” the Lemmon brothers explained.

Despite these challenges, they remain committed to their investment strategy, albeit with growing concern.

Jason Damm, an assistant professor of finance at the University of Miami, shares a similar story. After renewing his insurance, his premium spiked, only for his insurer to later withdraw from the state, canceling his policy. This left Damm without insurance and facing the daunting task of finding new coverage in a difficult market.

The Bigger Picture

The insurance landscape is rapidly changing. Homeowners insurance rates rose by double digits last year, according to S&P Global.

In the ResiClub-Groundfloor survey, of the 80% concerned about insurance costs, 37% were “very concerned,” and 43% were “somewhat concerned” .

This anxiety is likely to persist as the nation braces for a potentially “very active” hurricane season, which could further strain the insurance market.

Conclusion

Landlords across the United States are facing a perfect storm of rising insurance costs and increasingly stringent insurance policies. As extreme weather events become more common, the pressure on property owners will only intensify.

Landlords Face Rising Insurance Costs Amid Housing Market Challenges: 80% Express Concern in Recent SurveyThis evolving crisis underscores the need for landlords to stay informed and adaptable, navigating a complex and challenging insurance market to protect their investments and livelihoods.

For more insights on the housing market and insurance trends, visit ImpactWealth.Org.