Suze Orman Says 'Whether You Were Close To The LA Fires Or Not, We're All Going To Feel It' Because Insurance Companies Are Pulling Out

The wildfires in Los Angeles have claimed more than 12,000 buildings, bringing attention to a growing problem beyond California: the rising cost of homeownership due to escalating insurance premiums and natural disaster risks. On a recent episode of her Women & Money podcast, Suze Orman warned listeners about the financial implications of these changes, stating, "Whether you were close to those fires, not close to those fires, we’re all going to feel it."

As climate change intensifies, natural disasters like wildfires, hurricanes and flooding are becoming more frequent and severe. Insurance companies are pulling out of high-risk areas or significantly raising premiums as they experience mounting claims. 

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In California, USAA Casualty Insurance CO. increased home insurance rates by 25.9% as of Dec. 1, 2024. Insurance Business Mag reports that other policyholders saw increases as high as 48.5%. This trend isn't isolated to California; Florida and other states are also experiencing similar challenges. 

These rising costs can make it difficult for homeowners to maintain their properties, even if the homes are fully paid off. Orman pointed out that some people have been forced to sell their homes simply because they can no longer afford the insurance. 

In the podcast, Orman explained how these changes affect more than just homeowners; they impact the market and economy. 

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For instance, rising insurance premiums add to the overall expense of homeownership. Orman advises potential buyers to account for possible future increases of 30-50% in insurance costs to determine if they can afford it. 

She also noted that insurance is typically required to secure a mortgage. Buyers may be priced out of the market if premiums are too high. 

Orman also pointed out that states facing increased natural disaster costs may raise property taxes, placing an even greater financial burden on homeowners. 

Given these financial pressures, Orman suggested that renting might be a more viable option. "It may mean for many people that renting is going to be more affordable and a better choice, believe it or not, than owning a home," she said. 

She added that while many people may be concerned about renting for a while due to the affordability of homeownership, owning a home isn't the key to being financially secure. 

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On the topic of financial security, Orman urged listeners to have diversified portfolios and avoid putting all of their financial eggs in real estate. 

"It is not OK to have 100% of your money invested in real estate," she said. "It is not OK to have 100% of your money invested in the stock market. It is not OK to have 100% of your money, believe it or not, invested in bonds. It is not OK to have 100% of your money invested in gold, Bitcoin and so on."

Orman relayed a story about a woman with her entire nest egg in real estate. The woman owned three multimillion dollar homes in San Francisco. Orman advised the woman to diversify, but she was happy with the rent she received and how her finances looked. Then, a landslide due to torrential rains destroyed all three homes, causing the loss of that rental income – her entire security blanket. 

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While homeownership can be a good investment, it should not come at the expense of other critical financial goals, like maintaining a healthy emergency fund or contributing to a retirement account. 

For those who do own homes in high-risk areas, Orman advises taking these proactive steps: 

• Document Everything: Take photos of your belongings and store important documents in a secure, accessible space.
• Prepare Financially: Dedicate a portion of your budget to home maintenance and account for potential increases in insurance premiums or property tax rates. 
• Evaluate Insurance Options: Shop around for insurance policies and consider high-deductible plans as the premiums cost too much. 

It's not just those in natural disaster areas that are impacted. While they face the worst results, Orman notes that the resulting economic consequences are issues that affect everyone. Whether you're a homeowner or a renter, planning for rising costs and diversifying investments can help ensure financial stability in an increasingly unpredictable world. 

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