The $2 trillion home insurance nightmare is getting even worse

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Posted on 01/18/2025 9:54:19 AM PST by Angelino97

On top of the human tragedy they’re still inflicting, the Los Angeles wildfires are exposing a gap between what people thought their homes were worth and what they’ll actually get from insurance companies when those houses have been reduced to ash. Potentially thousands of homeowners are learning it won’t be nearly enough.

But this isn’t just a Los Angeles problem. From California to Texas, Florida and beyond, parts of the U.S. most susceptible to natural disasters are slowly waking up to an underinsurance nightmare. It’s still ballooning in scope as home values keep rising, people keep crowding onto the front lines of climate change and a heating planet keeps intensifying those disasters.

Four years ago, the total difference between harsh reality and what a site like, say, Zillow suggested homes were worth might have been $1.2 trillion, according to one estimate. Now that estimate has grown to $1.7 trillion. Without better foresight and action from policymakers, mortgage lenders, realtors and homeowners, it will keep growing, potentially to $2.7 trillion.

Dave Burt was one of the lucky investors who saw the 2008 mortgage crisis coming, earning himself not only a big payday but a mention in The Big Short by Michael Lewis. Now he’s the founder and chief executive officer of DeltaTerra Capital, a research firm compiling data on the next housing crisis — this one caused by climate change.

Last year, Burt warned that 17 million U.S. homes, representing nearly 19% of total housing, were underinsured against damage from floods and wildfires alone. The gap between the market value for those homes and their insurance coverage amounted to $1.2 trillion, Burt estimated.

(Excerpt) Read more at hawaiitribune-herald.com ...

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1 posted on 01/18/2025 9:54:19 AM PST by Angelino97

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