Home insurance skyrockets to ‘astronomical’ rates for many on the MS Coast. ‘It’s scary.’

Homeowner insurance rates along the Mississippi Coast are skyrocketing and insurance agents are in some cases scrambling to find coverage for older homes.

“It’s getting ugly out there,” said Joel Verdon, senior vice president at Lemon-Mohler Insurance Agency. He said rate increases are running 15-70%, and sometimes even doubling.

Scott Mosher, owner and agent at Bishop Insurance Agency, said the rate increases are most acute within two miles of the coastline.

In addition to higher costs, coverage options are in some cases shrinking, too, both insurance executives said.

The higher cost of insurance is forcing homeowners to make tough financial decisions. Coupled with rising interest rates, insurance costs are also contributing to a slow-down in the real estate market, said Tanya Swoope, a real estate broker and founder of Gollott Lyons Real Estate.

Single-family home sales are down about 26% for the first quarter of 2023 compared to the same period in 2022, an analysis by Carlene Alfonso at Coldwell Banker Alfonso Realty shows.

“Everything we keep hearing is that it’s increasing, but now I keep hearing these rates are getting astronomical. It’s scary,” said Danny Lee, CEO of the Gulf Coast Association of Realtors.

The insurance and real estate professionals offered advice for homeowners facing higher homeowner insurance bills.

Why insurance costs are increasing in the Biloxi area

Homeowners tend to see no rhyme or reason for their escalating insurance costs. A recent Facebook post on the Ocean Springs Talk of the Town page said: “Looking for home insurance our policy, almost doubled with no claim ... thank you in advance.”

But an individual homeowner’s claims history is only a small part of the equation insurers use to set rates.

Verdon and Mosher said current increases are driven by the cost of reinsurance, which is basically insurance that insurance companies buy to lower their financial risk. And reinsurers are drawing the line on what risks they are willing to accept.

Mississippi Insurance Commissioner Mike Chaney said consumers may not realize all that factors into reinsurance prices, including the war in Ukraine. High inflation and increasing natural catastrophes are also included in the equation.

“Climate change is definitely a thing,” Verdon said.

As reinsurers tighten their rules, some insurance companies have dropped out of coastal markets altogether, although Chaney works to bring in more companies and encourage those that are here to stay.

The insurance companies still in the market are more finicky about the risks they’ll accept. And they have better technology to hone in on risks, old roofs being a big drawback. Insurance companies can use satellite imagery to detect a roof’s age.

Some insurers are no longer willing to offer replacement-cost coverage for roofs that are more than 10 or 15 years old, Verdon said. Instead, coverage is based on an older roof’s actual value at the time of loss. Sometimes, he said, this lower coverage is buried deep in the policy and homeowners are unaware until their roof blows off that they will have to pay more out of pocket to replace it.

One insurer, he said, no longer covers fences.

“Now, more than ever, is a good time to read your policy,” Verdon said. “Don’t just buy on price, buy on coverage.”

How to lower your rates during inflation

Mississippi Coast homeowners faced with increasing rates and less coverage should make sure their insurance application is updated to show any improvements, such as a new roof, plumbing or electrical work. They should also check for discounts that are offered for things such as plywood cut to fit windows or shutters for storms.

Accepting a higher deductible is also a way to lower insurance premiums.

Not everyone has $15,000 or more to spend on a new roof. In some cases, homeowners who have paid off mortgages are dropping wind coverage from their policies.

“That scares me,” Mosher said. “It’s got to be stressful to own your house outright and not have wind coverage if a storm is out there.”

More and more homeowners near the water are forced to accept coverage from surplus lines companies, those that are not regulated by the state. Admitted carriers such as State Farm and Nationwide have pulled back from offering wind coverage near the coastline.

Surplus lines companies can charge what they want for homeowner’s insurance, while admitted carriers must get increases approved by the Mississippi Insurance Department. Chaney tries to hold the line on rates increases by admitted carriers. But inflation means insurance companies are demanding higher insured values on homes, which also drives up a homeowner rates.

Chaney said homeowners should consider higher deductibles or lower coverage on contents to reduce their insurance costs.

MS Coast real estate market adjusts to higher costs

The cost of insurance might have been an afterthought for home buyers before Hurricane Katrina hit in 2005, but it’s a major factor in today’s real estate market.

A buyer might have to lower what they can pay for a house because of insurance rates.

”It’s a widespread problem, but especially true nearer the water,” Swoope said.

Insurance prices drop on newer construction north of Interstate 10, said Amanda D’Angelo, a real estate broker and owner of Coastal Realty Group.

On older houses valued at less than $200,000 closer to the water, she said, monthly insurance costs can exceed the monthly cost of the house. Sellers might have to be willing to accept less money for their homes because insurance costs so much.

Insurance has become such a driver in the housing market that the Gulf Coast Association of Realtors is offering seminars on the topic to its members. Verdon recently talked to Realtors about the homeowners market. Next up is flood insurance.

The association’s CEO, Danny Lee, said he recently experienced sticker shock when the agency’s insurance bill arrived. Their building is located just south of the CSX railroad tracks near the beach in Gulfport. Their insurance renewal offer “nearly doubled,” he said.

“We actually reached out for other (insurance) quotes and couldn’t even get other quotes because of our proximity to the beach.”