For much of my real estate career, homeowners insurance was largely an afterthought. A client would get an offer accepted on a property, and we’d begin the loan process and title work. Along the way, we’d be reminded to arrange homeowners insurance. The client would select an agent, sign up for insurance, and everything would be good to go. But times have changed—homeowners insurance can no longer be an afterthought.
So, what changed? An increase in severe weather events, rising costs of building materials, and soaring home values have put financial strain on insurance companies. As a result, many insurers have gone out of business, pulled out of high-risk areas, or imposed strict limitations on what they will cover. In the past, especially in Iowa, homeowners insurance was a small line item in the household budget, but not anymore.
I recently met with Mike Lane, owner of Lane Insurance Agency in Norwalk, IA, who shared some revealing insights. For years, Iowa had some of the lowest homeowner insurance rates in the country, mainly due to intense competition in the industry. Unfortunately, that has contributed to Iowa ranking as the 6th most unprofitable state for homeowners insurance. Approximately 15 insurance companies have exited the Iowa market over the past year. Among the companies that remain, some are not issuing new policies, while others have tightened their underwriting requirements and raised premium costs.
The most common restrictions on new homeowners insurance policies include limitations based on the age and condition of the roof shingles, electrical wiring, and electrical panels. Good luck finding an insurance company that will cover a home with a roof older than 10 years—if you do, expect higher rates. These restrictions are even impacting real estate transactions. A home might be deemed uninsurable, or the higher premiums may push a buyer’s monthly expenses beyond what their income allows for a mortgage qualification. If the seller can’t or won’t make the necessary repairs before closing, the transaction could be canceled.
Why are insurance claims on the rise in Iowa? While we may not face hurricanes, recent years have brought plenty of hail, tornadoes, and flooding to the state. Iowa ranks 8th nationally for hail damage, according to Insurify, and 7th for tornadoes, per the Weather Channel. And let’s not forget the derecho that pummeled Iowa in August 2020. The Weather Channel reported that storm caused $11.5 billion in damage.
The best way to ensure a smooth real estate transaction is to work with a professional real estate agent and contact your insurance agent as soon as your offer is accepted.
Norwalk IA Real Estate –
Jon Niemeyer, Broker/Owner/REALTOR® at EXIT Realty North Star. I list and sell real estate in Central Iowa including Norwalk, Des Moines, West Des Moines, Cumming, Indianola, Carlisle, Waukee, Urbandale, Grimes, Clive, Johnston, Ankeny, Altoona, and Pleasant Hill in the Counties of Warren, Polk, Dallas, and Madison. Call
Jon Niemeyer at
515-490-4675.