Many people were shocked in the wake of Hurricane Rita at seventy percent of the homeowners (who were overwhelmingly low income) who lost their home or suffered major damage had no homeowners insurance to help them to rebuild.
The next time a hurricane strikes the same will be true.
This is not a question of carelessness or irresponsibility on the part of most low-income homeowners. It is a simple matter of economics. Homeowner’s insurance costs in Texas Gulf Coast counties is so high low income families just cannot afford it.
For example, I pulled insurance quotes off of the Texas Department of Insurance’s (TDI) web site for the area of Port Arthur, Texas where many low income families live. The Department of Insurance requires the top 25 insurer groups by national premium volume to submit their rates.
Insurance rates vary by whether a claim had been filed by the homeowner recently, the homeowner’s credit rating, the value and construction type of the home. For purposes of the generating a quote off the TDI web site I assumed the homeowner had not filed a claim in five years, had an average credit rating (not the case for many low=income families but I wanted to see what the best case result would be). I also entered that the family lived in a 35 year old wood frame house worth less than $75,000.
Five of the top 25 insurers would not provide a quote for my hypothetical homeowner. The rates for the remaining 20 companies ranged from $751 to $4,120 per year. The median rate was $1,348.
Add to that flood insurance on a $75,000 house of an additional $230 per year and the median cost to provide insurance would be $1,578 per year.
That is in excess of two month’s social security benefits received by many elderly widows living in these communities.
As long as insurance is beyond the reach of low-income families they will not buy it. And when the hurricanes come, they will be financially wiped out and will have nowhere to turn but government and charities to rebuild.
This is the economic reality that low-income families living in Gulf Coast counties face.