Hidden Barriers to Housing Affordability: Homeowners Insurance

For homeowners in Dallas and across the nation, and aspiring homeowners, the rising costs of home insurance are making homeowning unaffordable. According to a recent article, homeowners in Texas are witnessing some of the steepest increases in home insurance premiums over the past year.  When we discuss housing affordability for the middle and working class, there is more to it than simply the cost of building homes. Home insurance premiums can also become a barrier to homeowning. Here are some of the issues influencing insurance affordability and equity in Dallas and how they impact current and aspiring homeowners.

National Insurance Premiums and Weather Related Disasters 

Insurance companies have raised premiums and reduced coverage to offset significant losses stemming from weather-related disasters. The state of Texas faced numerous losses, with the costs related to the winter storms of February 2021 being one of the costliest climate disasters in recent memory. Florida and California also have witnessed companies refusing to underwrite policies. Insurers are adopting stricter underwriting practices, increasing rates, and limiting coverage on certain types of damages, placing the homeowner in a precarious position in the event of a natural disaster. 

As insurance companies are transferring more of the risk to homeowners,  buying a home is becoming even more unaffordable. Rates in Texas have surged from 20-30%, making it one of the most expensive states in the US. Which is primarily attributed to the increased risk of natural disasters. 

Barriers to Homeownership and Hidden Housing Costs 

The cost of home insurance places a substantial financial burden on potential homeowners and existing homeowners. Coupled with inflation and high-interest rates, these are substantial barriers to homeowning and comprise just part of the affordability crisis we are seeing in Dallas. Homeowners in Dallas struggle to balance their budgets, juggle mortgages, and now have added weight of being sure that their homes are adequately insured. 

According to data from Real Estate Witch, the average American homeowner spends approximately $17,500 on a home a year, $1,516  of which is insurance. Where we have premiums rising 20-30% in many states, this makes homeowning even more expensive. The survey showed that 90% of recent homebuyers underestimated the true cost of owning a home. This underscores the need to address barriers to homeowning and awareness around the hidden housing costs that make being a homeowner unaffordable. 

Homeowner  Solutions

There are a number of strategies existing homeowners and aspiring homeowners can consider. First, Understand Your Coverage. The Texas Department of Insurance provides resources to help homeowners understand coverage better. Be sure that you understand your existing policy. Second, Bundle Your Coverage. Insurance providers can offer discounts when you bundle different types of coverage, for example, you can bundle car and homeowning insurance for a better rate. Exploring these options can help you save on insurance costs while maintaining comprehensive protection, and most of all, keep you informed. 

Home insurance affordability and equity are intertwined issues effecting homeowners in Dallas. Where rising premiums and limited coverage options become more widespread it is essential for homeowners to stay informed, and find solutions that are cost-effective. DCH encourages existing and potential homeowners to explore various policies and educate yourself on your coverage.