The New Challenges With Insurance

As if it isn’t hard enough for buyers these days with unfavorable interest rates and limited inventory, another growing challenge is obtaining a homeowner’s insurance policy. Of the countless steps involved in the home-buying process, this one has typically been a fairly minor administrative task that’s often an afterthought. But no longer.

This is because the insurance industry has faced years of losses due to the increased volatility and frequency of natural disasters, including wildfires, tornadoes, floods, hurricanes and other severe storms caused by climate change. As a result, many insurers have stopped underwriting new policies in certain states and have made their requirements more strict for nearly every part of the country. These challenges have arrived in the Portland metro region, and not just due to increased wildfire risks in the urban/rural boundary areas. Insurers are simply much more conservative in which properties they’ll underwrite and the costs for these policies have drastically increased, sometimes by more than 50%.

Here in Oregon we’ve been relatively fortunate to escape that fate (so far), but the devastating 2020 wildfires are a stark reminder of how quickly things can change. That year in Oregon, losses totaled two billion dollars. As a result, insurance rates have increased dramatically over of the past several years here and nationally, and finding carriers willing to underwrite new policies has becoming increasingly more difficult.

A recent New York Times article explains:

“In 2023, insurers lost money on homeowners coverage in 18 states, more than a third of the country, according to a New York Times analysis of newly available financial data. That’s up from 12 states five years ago, and eight states in 2013. The result is that insurance companies are raising premiums by as much as 50 percent or more, cutting back on coverage or leaving entire states altogether. Nationally, over the last decade, insurers paid out more in claims than they received in premiums, according to the ratings firm Moody’s, and those losses are increasing.

The growing tumult is affecting people whose homes have never been damaged and who have dutifully paid their premiums, year after year. Cancellation notices have left them scrambling to find coverage to protect what is often their single biggest investment. As a last resort, many are ending up in high-risk insurance pools created by states that are backed by the public and offer less coverage than standard policies. By and large, state regulators lack strategies to restore stability to the market.

[…]

The turmoil in insurance markets is a flashing red light for an American economy that is built on real property. Without insurance, banks won’t issue a mortgage; without a mortgage, most people can’t buy a home. With fewer buyers, real estate values are likely to decline, along with property tax revenues, leaving communities with less money for schools, police and other basic services.”

The typical challenges with obtaining homeowners’ insurance, and mainly with older homes, used to be the presence of active knob & tube wiring and/or an outdated and hazardous electrical panel. But now, homebuyers are increasingly being asked to provide the age of the roof, verify the type of plumbing, confirm whether there is an underground heating oil tank (and whether it’s been decommissioned properly), and even the age of the HVAC system. Underwriters will also review maps to understand proximity to potential wildfire danger zones, often in the rural/urban interface areas that surround the Portland metro region. In situations where buyers have waived inspections in order to be competitive and present a winning offer (never something I’d recommend, but it happens), the insurance company will be even more hesitant to underwrite without that additional information to verify the condition and makeup of the property.

The takeaway here is that this is no longer a minor step in the homebuying process, and you should be prepared to obtain verification on these questions from the sellers, your inspection report, or other methods of due diligence, and don’t expect that your current or favored insurance company will be able to offer you a policy.

In the long and complex road to homeownership, it’s important to be prepared for every step of the process, especially for the many things that happen after your offer has been accepted. Make sure your agent can help you navigate all of these efficiently and effectively to make the process as smooth as possible for you. Please let me know how I can help you navigate you safely home!

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🌹 I’m a licensed real estate agent @livingroomrealty, the #1 brokerage in the City of Roses — Portland, Oregon.

🏘️ I provide expert advocacy in buying/selling homes wherever you are in the process.

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Andy Meeks

Principal Broker | OR

He/Him

My clients are always my top priority, and my singular focus is their success. This is the intention I set every day. My training and background as a licensed attorney helps me lead with a sharp attention to detail, a keen ear and focused voice, and an unwavering commitment to integrity, transparency and discretion. I’m a passionate advocate and I thrive when helping others succeed, and I’m always available to connect over a cup of coffee to learn how I can help make good things happen. Read my client reviews here. The choice to become a real estate broker was a joyful combination of two very different careers. Prior to moving to Portland in 2008, I was an environmental and title closing attorney in Massachustts. Since then, I've served as a program manager and fundraising professional for Portland-based non-profit organizations Friends of Trees, The Freshwater Trust and Ecotrust. While not scouting homes and helping clients, you can find me riding bicycles, skiing, digging in the garden, experimenting in the kitchen, and exploring the stunning beauty of the Pacific Northwest. Please let me know how I can help you or someone you know. Thank you! *I'm licensed as an attorney in Massachusetts and can't offer any sort of legal advice.

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