Navigating Homeowners Insurance Conversations with Buyers
As insurance rates skyrocket in areas prone to extreme weather, real estate agents need to ensure homebuyers understand the associated costs to avoid last-minute surprises at closing.
The average homeowners insurance premium has outpaced inflation from 2018 to 2022, according to a recent Treasury Department report. This trend is particularly pronounced in regions affected by severe weather events. With insurance costs now adding hundreds of dollars to monthly housing payments in some U.S. areas, buyers are increasingly raising concerns about insurance expenses early in the homebuying process.
Proactive Conversations are Key
James Cristbrook, National Association of Realtors’ community engagement liaison, emphasized the importance of discussing insurance costs before buyers start making offers. “Nobody wants a closing to come to a screeching halt due to high insurance costs,” he noted during a panel discussion at NAR’s mid-year legislative meetings.
Scott White, commissioner of the Virginia State Corporation Commission’s Bureau of Insurance, advised buyers to factor insurance costs into their home purchase calculations. “You’re not violating ethics or licensing requirements by urging them to use due diligence,” he said.
Understanding the Factors Behind Rising Insurance Costs
Several factors contribute to the increase in homeowners insurance costs, according to Michael Richard-Crum, senior director of personal lines and counsel at the American Property Casualty Insurance Association. These include extreme weather conditions, inflation, rising repair costs, and high home prices, leading to decreased availability of policies in vulnerable areas.
However, Richard-Crum noted that while the current market is challenging, insurance costs have historically moderated over time. His advice to real estate agents is to build relationships with insurance agents, who can provide valuable insights into local market conditions and available coverage options.
The Importance of Roof Condition
Roy Wright, president and CEO of the Insurance Institute for Business and Home Safety, stressed that agents and buyers should pay close attention to a home’s roof, as 80% of insurance claims originate from roof issues. The prevalence of asphalt shingle roofs in the U.S. and Canada makes them particularly vulnerable to wind and hail damage.
Wright explained that the adhesive used in asphalt shingles tends to break down over time, especially after 10 years, increasing the risk of damage. Upgrading or replacing roofs with more resilient materials like metal or slate can not only benefit buyers but also enhance a home’s resale value.
By addressing insurance costs proactively and understanding the factors that influence them, real estate agents can better guide buyers through the homebuying process and avoid potential pitfalls at closing.
