Expensive home insurance hurts everyone, but it really takes its toll in states where there are many different kinds of losses.
The concept of insurance was created to spread the risk of loss over a large group of people, so that each person bore a small share of the risk. So when we talk about the types of risks that drive up homeowners’ insurance costs, it means that the person who pays premiums for their home in Upper Michigan is partially subsidizing the person who has a home in coastal Louisiana.
Hurricanes and tornadoes are just big wind storms. But it’s not the only disasters that drive up insurance premiums. Fires, hail and floods all work to drive up premiums, and insurance companies pay more claims each year for the combined smaller risks than they do for hurricanes.
A huge risk that the insurance companies no longer fear is mold. Until 2003, policyholders filed about as many mold claims as fire claims each year. And the mold claims trend increased. But after the tragedy of September 11, 2001, insurance companies quietly convinced all insurance commissioners in America to allow them to exclude fungal claims from coverage.
But even though the insurance companies have eliminated most of the mold exposures, they still need to insure the other risks for homes. So, here are the top ten most expensive states to insure a home. We’ll start with the least and move on to number one.
10. Kansas – Author Frank Baum placed the book “The Wizard of Oz” in Kansas for a reason…it is considered “tornado alley”.
9.Alabama – This state experiences tornadoes, hail, major thunderstorms and hurricanes. In addition, the building codes are stricter than those of the neighbors, which increases the cost of repairs.
8.Rhode Island – Small state, long coastal exposure. So, hurricanes that ravage the East Coast pound this state.
7. California – “Earthquake Central”, plus wildfires, mudslides and coastal storms make this state an expensive place to insure a home.
6. Florida – sticks out like a sore thumb in the Caribbean and is often beaten by hurricanes. One of the main reasons insurance is so expensive here is that dozens of insurers have pulled out of Florida. The largest player in the market is Citizens Property, a high-risk fund managed by the state. Their number is not added to the Florida totals, otherwise it would probably be number one.
5. Mississippi – lax building codes increase risks, as does a coastal state with hurricanes, tornadoes, hail and flooding.
4. District of Colombia – Construction costs in DC are higher than most places in the country, and are also considered Ground Zero for terrorism risks.
3.Oklahoma – Big winds plus big tornadoes make this state one of the most expensive states.
2. Louisiana – shares the same challenges as Mississippi but adds a large population center below sea level.
And, first (or worst!)…Texas! Here you will find all calamities in one place. Hurricanes, floods, hail, storms and earthquakes all make it difficult for insurance companies to continue writing profitably in Texas.
But take heart, insurance company fans! With the new policy language, called the “Anti-Concurrent Causation Clause”, insurance companies can now reject ALL claims where two or more risks cause damage. For more information, read “The Insurance Industry’s Latest Scam” on this forum.
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