"I can definitely say that it's a topic of conversation and on their radar for my Florida clients," said Mr. Diton, president of the Wealth Alliance, an investment advisory firm. "They're seeing an increase in their insurance costs."
Mr. Diton, who lives in Boca Raton, Fla., and Long Island, said he was in the same situation. "My insurance company raised my premiums quite a bit," he said of his Florida home. "It was difficult to find a lot of choice, which has resonated with a lot of people in this state."
While Florida residents are not the only ones dealing with this issue, the state's popularity among retirees means that it is a problem that an increasing number will face, according to experts. When planning a budget for living on a fixed income, most prospective retirees consider services and goods that are likely to increase in price in the future, such as doctor visits or prescription drugs. Almost no one considers home insurance — an omission that insurance professionals warn will become increasingly costly.
Many Americans' plans to retire in a coastal Sunbelt state or a scenic mountain hamlet are colliding with extreme weather — and the resulting property damage.
"In some regions, we already see changing weather patterns, most likely caused by climate change, having an impact," said Ernst Rauch, chief climate and geoscientist at Munich Re.
Following the devastating losses caused by floods, hurricanes, and wildfires in recent years, many insurers are rethinking their risk modeling practices. As a result, many homeowners' property insurance premiums will rise. Others may find it difficult to obtain a policy at any price.
"The insurance situation has been really difficult in certain parts of the country — in particular, Florida and that area, including Louisiana and the Gulf states," said Nancy Albanese, vice president of personal insurance at BMT Insurance Advisors. "The other difficult market is California and some of the Western states that are prone to wildfires."
"When we come across a client who needs coverage in Florida, we know it's going to be a huge challenge," she added.
Karen Collins, assistant vice president of personal lines for the trade group American Property Casualty Insurance Association, said she and her colleagues had recently seen "a very significant increase in losses."
"Natural disasters, in particular, have been extremely elevated in the last couple of years," she said.
Premiums are rising as a result of this trend. According to AM Best, a ratings and analytics firm in the insurance industry, the total amount of homeowners' insurance premiums paid by Americans increased by 8.4 percent between the third quarter of 2020 and the third quarter of last year. (An AM Best spokesman pointed out that this aggregate snapshot did not include the amount paid by any individual policyholder.)
Ms. Albanese stated that an insurer recently dropped one of her clients, who was already paying $22,000 per year to insure a coastal Florida property. Ms. Albanese was able to find the client coverage through a "surplus lines" provider — an insurer of last resort for the highest-risk policies — after some scrambling, but at twice the cost.
"It's been back-to-back years of these rate increases, and I can think of at least one client who says they're planning to sell their Florida property just because it's becoming outrageous to insure," Ms. Albanese said. "I've also had clients purchase properties in Florida recently, unaware of what the insurance market was like down there, and they were just astounded — they had no idea how high their premiums would be."
Mr. Diton stated that rising property insurance costs, especially when combined with higher property taxes in areas where home values have risen significantly, were especially important for clients considering purchasing investment real estate for passive income generation. This is a popular strategy among retirees and even some younger investors.
When a client expresses interest in a property, Mr. Diton says he will create a spreadsheet and analyze the expenses. Prospective buyers may decide not to purchase in some cases. "The increase in homeowners' insurance is definitely contributing to the problem for those people," he said.
Insurance experts on the East Coast report similar market conditions. "What we're seeing is that the companies that specialize in writing homeowners' insurance along the coasts are closing down, so we don't have as many options," said Robin Jaekel, vice president of personal lines at Glenn Insurance, a New Jersey insurance agency that does a lot of business along the Jersey Shore. "Homeowner costs along the coasts are unquestionably impacted."
Hurricanes and nor'easters are the main reasons insurers are leaving the market, according to Ms. Jaekel. The recent overhaul of the federally subsidized National Flood Insurance Program adds to the headaches — and costs — for property owners who are required by their mortgage holder to carry flood insurance in addition to homeowners' insurance.
In many cases, the only policy available to a homeowner is one that limits the amount of compensation available after the most severe storms. "All policies around here now have the 'named hurricane deductible,'" Ms. Jaekel explained. "If it's a named hurricane, they have a separate deductible."
Extreme weather experts predict that stories like these will become much more common in a rapidly warming future. "Hurricanes on the East Coast of the United States are also moving north," Mr. Rauch explained. "As the water has warmed up, the likelihood has increased in northern U.S. regions."
"This is a huge, long-term issue for every developed area of the United States," Jim Blackburn, professor of environmental law and co-director of Rice University's Severe Storm Prediction, Education, and Evacuation From Disasters Center, said via email.
While coastal regions are likely to face the most challenges as a result of more intense storms, rising rainfall means that even homes near – rather than within – floodplains may become more vulnerable. "We haven't even started to understand the effects of climate change on settlement patterns," he said.
The rising cost of damage from extreme weather adds to a slew of other factors driving up the cost of homeowners' insurance. Supply-chain bottlenecks and a labor shortage make it more expensive to repair or rebuild homes after a disaster, according to insurance professionals, who also blame home construction and design trends. Rebuilding after a natural disaster may be more expensive in neighborhoods with older housing stock due to measures to bring the property up to current building code standards.
"Building materials themselves are predisposing them to more catastrophic losses," said Jared Carillo, director of foundation accounts at SmithBrothers, a Connecticut-based insurance brokerage. Today's building materials include more synthetics that burn faster and hotter, such as particleboard, spray foam, and wire insulation, he says.
According to Mr. Carillo, open floor plans are another culprit: "A fire that starts in the kitchen will generate more loss across the first floor."
Some of the weather changes being tracked by the insurance industry, such as the northerly drift of "Hurricane Alley," are slow and gradual shifts. Others, such as the droughts that have exacerbated massive wildfires in the Western United States, have reached a tipping point much faster. Mr. Rauch stated that in the 1980s, the average annual insured loss from wildfires in the United States ranged from $1 billion to $3 billion.
"This was the expectation for the future," he said.
That all changed in the blink of an eye. "For the first time, insured losses were in the $16 billion range in 2017," Mr. Rauch said. "It was a huge jump, and 2018 was essentially the same." Following a relatively mild Western fire season in 2019, 2020 brought another round of eye-watering losses, this time in the neighborhood of $11 billion.
It demonstrates that even the most agile businesses can be caught off guard by how quickly conditions can change. Wildfires, according to Mr. Rauch, have brought about significant changes in the last four to five years. "The loss situation was completely different than it had been for decades," he explained.
According to insurance and real estate professionals, this is especially troubling for people who established roots decades ago with the expectation of growing old in those homes and neighborhoods, only to discover that the ground beneath their feet has shifted.
"I do have people who retired here," Patrick Brownfield, personal risk adviser for insurance broker Hub International in Jackson, Wyoming, said. "They've had astronomical increases in their insurance in the last two years," he said, adding that those homeowners are left with few options. "It'll cost them $20,000 a year on their fixed income, and they can't afford it because all their equity is in their home," Mr. Brownfield explained.
However, deciding to sell can present even more difficult decisions.
"Real estate contracts are now contingent on the ability to obtain that insurance," said Ed Liebzeit, a Sotheby's International Realty broker in Jackson.
"People approaching retirement age face two challenges," he says. "If they're on a fixed income, their insurance will rise, but so will their property taxes." According to him, this is a disadvantage of the area's rapidly appreciating housing market. As a result, retirees are increasingly being displaced.
"The problem is that they have to leave town because there is no other way to buy low and stay here unless they go to a very small condo," Mr. Liebzeit explained. "As a result, the majority of them are departing."