Home Insurance Realities

Home insurance rates have been rising beyond all reason, and many older people are abandoning the idea entirely. Unlike car insurance, nothing in law requires anyone to carry insurance on their house, and a growing number of homeowners—especially in Texas—are questioning whether the product is worth what it costs anymore.

A conspiracy theory circulating online is that insurance companies took massive financial hits because of the mRNA COVID vaccines (what I call the "KarenVax") and are now trying to spread the financial pain onto homeowners through inflated premiums. Since I never took the KarenVax, I don't feel any obligation to help absorb costs that may have resulted from it.

I asked ChatGPT for thoughts on this, and the response was interesting. First, there is no credible evidence that home insurance rates are rising due to mRNA vaccine payouts. Life insurers, not home insurers, would be the ones affected by vaccine-related deaths, and life insurance rates have stayed comparatively stable. Home insurance covers damage to structures, not medical claims, so even if vaccine injuries were widespread, there’s no mechanism by which those costs would land on home-insurance balance sheets.

But the overall spike in home-insurance premiums is very real and is driven by other factors. Among the biggest causes:

1. Reinsurance costs have exploded.
Reinsurers (the companies that insure the insurance companies) have raised their rates dramatically for the last three years. When the wholesale cost of insurance goes up, every insurer passes that increase along to consumers.

2. Construction and rebuilding costs are up 35–50% since 2020.
Lumber, roofing, drywall, copper, and labor costs have all gone up sharply. Insurance premiums track rebuild cost, not market value, so higher materials prices equal higher premiums.

3. Natural disasters are more frequent and more expensive.
Whatever the cause, the financial reality is that insurers have been paying out heavily due to hailstorms, tornadoes, hurricanes, and freeze events in unexpected places (such as Texas in 2021).

4. Contractor and roof-fraud in several states.
Particularly in Florida, parts of Texas, and Colorado. Storm-chasing contractors inflate claims, sue the insurers, and collect payouts even when damage is minor or fabricated. This has bankrupted several insurers.

5. Insurers are retreating from entire states.
California and Florida have seen major insurers stop writing new policies. When competition drops, rates rise.

6. The low interest rates of 2020–2022 hurt insurers.
A major portion of insurance company profits comes from investing premiums. With near-zero interest rates, their investment income collapsed.

All of that has combined into the brutal price increases homeowners are seeing today. Ironically, people with the safest houses and strongest construction are often seeing the worst hikes, simply because the industry is in turmoil and spreads its costs across all policyholders.

---

My own situation: my house is extremely solidly built. Hurricane Harvey—the worst hurricane I’ve ever witnessed in nearly 80 years—passed directly over my neighborhood. The only damage was downed slat fences and a handful of roof tiles. My single $8,000 roof-repair claim after Harvey is the only insurance claim I’ve ever filed since moving to Texas in 2012.

The house was built in 1978 and has come through every other storm with no issues. We don’t get tornadoes in my part of Texas, and I’m on high ground with virtually zero flood risk.

Given that, my thinking is simple: I don’t want or need an insurance policy crammed with coverage for risks I don’t have. What I’d really like is a policy that covers:

• Fire (the only thing that could completely destroy a house like mine)
• Liability (in case someone gets hurt on the property)

And skip everything else. A policy like that shouldn’t cost more than around $2,000 a year—or even less.

ChatGPT’s response confirmed that this thinking is completely sound. For a house built in the late 70s that’s survived Harvey and sits on high ground, the real catastrophic risks are limited to fire and liability. A stripped-down “named-perils” policy with a high deductible is exactly what many people in my situation are doing.

Such policies still exist, but insurers rarely advertise them because they’re not as profitable. However, homeowners who insist, or who use brokers who know how to request them, can often get premiums down to the $1,200–$2,200 range.

Some people even go further and self-insure the structure entirely while carrying only a separate liability umbrella policy. That can run as low as $150–$350 per year and covers lawsuits without tying you to a bloated homeowners policy.

Bottom line: based on my location, construction quality, and storm history, it makes sense to seek either a fire-and-liability-only plan or a high-deductible, named-perils policy. There is no reason to pay for dozens of coverages that don’t apply to my house or my risk profile.