Home Insurance Changed Everything

Without home insurance, most Americans would be homeless.

I don’t mean we would all be living on the streets. But most of us would-be renters, not owners of our homes.

Access to home insurance is the primary reason most people are able to own a modern house.

Homeownership is part of the modern “American Dream” for most people. Homes have gotten bigger, more comfortable, and more expensive over the last century. I bet you’ve never stopped to wonder how or why that’s happened.

I would argue, that the ability to buy home insurance has allowed for bigger and more expensive homes to be built, as well as giving people a chance to be homeowners who could not otherwise afford it.

Without access to home insurance, home ownership would only be possible for the ultra-wealthy. They would be the only ones with the financial ability to recover from a fire, storm, or other catastrophes.

Let’s look at homeowners in Oklahoma.

  • The average home in the Oklahoma City metro area in 2018 is about $143,000, according to Zillow.com.
  • 63% of homes purchased in the OKC metro area cost between $150,000 and $300,000, according to the US Department of Housing.
  • But, the median income of an Oklahoma household was just under $50,000 in 2016, according to the Department of Numbers.

So, how can someone buy a house that is 3 times their annual income?

They borrow the money, of course. Most people have to take out a mortgage to purchase a house. A common home loan is about 3 times a person’s annual income. It’s set up on a loan to be paid back in 30 years. There is a lot to be discussed in those last two sentences, but that will have to wait for another blog.

Getting a home loan sounds easy, but anyone that has gone through the process knows it’s not. Most of the focus during the loan process is on your credit rating, proof of income, and interest rates. It’s all about “how much house can you buy”.

Here is a fun fact: Regardless of the excellence of your credit or the amount of your income, the bank will NOT make a loan on that house if you don’t have insurance.

If you think about it, you wouldn’t want them to.

If you had a $200,000 home loan and lost your house to a fire or storm and didn’t have insurance, do you think the bank would just forgive the loan?

Nope.

Insurance protects the borrower and the bank. It’s really the only reason 99% of us can “afford” to buy a modern house.

Even if you could pay cash for a house, wouldn’t it be foolish not to purchase home insurance? You would want to protect your investment against a major loss, just like the bank does.

I like big houses, I cannot lie.

Between 1920 & 1950, most single-family homes in America averaged 983 square feet in size. (Check out the average house size in America over the years.)

These houses were nothing like modern homes. It was an exception, prior to 1950, to have the luxury of running water or indoor plumbing in most places in the United States. Electricity in a house was also a modern marvel for most people as well, prior to 1950.

Prior to 1950 people ate and slept in their house, but spent the majority of their leisure time out of the house. I can’t blame them. Who would want to sit in a small room with no air conditioning, no lights, and no bathroom? I’ll pass.

Don’t misunderstand. There were many nice homes built before 1950. But if there was any kind of catastrophe which damaged the house, the homeowner was on the hook for the whole cost to repair or rebuild it.

Thank God for 1950!

Interestingly, the first modern home insurance policy was made available in 1950. For the first time, a homeowner could purchase an insurance policy that would help pay for damage to their house resulting from storms, theft, fire, and water pipe leaks.

This modern home insurance policy, which would help a homeowner pay for damage from these types of losses, changed everything in terms of what kind of house they lived in.

Why invest in a nice house if tomorrow a storm or fire could destroy it and leave you not only homeless but broke too? Now a person could invest in building a home with some peace of mind that they could recover financially from a loss and be able to restore their damaged home.

Not only did the size and features of an average house in America begin to increase after 1950, but the cost of a house increased substantially too. The average cost for that 1000-square-foot house in 1940 would have been $30,600 (cost adjusted for current value). The same house today would likely cost about $100,000 to build.

The average house size and amenities began to grow rapidly after 1950.

What does a nicer, bigger house mean for home insurance in Oklahoma?

Oklahoma has some of the highest costs for home insurance in the country. Not because we have the most expensive homes, but because we face almost every risk that leads to damage to a home.

Hail storms, water pipe breaks, wildfires, and theft, not to mention floods and earthquakes, are ever-present risks for Oklahoma homeowners.

No matter what size or level of customization your house is, having a professional insurance advisor is important. For most of us, our house is the most valuable asset we will ever own.

Building and buying an efficient home insurance policy is critical because of the cost Oklahoma homeowners bear. Unfortunately, many of us purchase insurance based on the price, thinking that one policy or company is as good as another.

Here is where that logic is wrong.

Home insurance is personal. Your risks and needs are unique to you and your family. A home insurance policy can be tailored for you if you have an advisor willing to dig a little deeper into your needs, rather than just asking how much coverage you want.

Access to home insurance is amazing in that it allows us to purchase a home we really can’t afford. But let’s face it, the subject of insurance is unsexy and may seem a little boring.

However, an hour spent reviewing and creating a proper insurance plan will seem like the smartest thing you ever did when you’re looking at your damaged home.

We would love to be your professional insurance advisor. Call us at 405-340-0606.

Or complete this brief form and we’ll reach out to you to get the conversation started.

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Are you ready to save time, aggravation, and money? The team at Allen Drew Insurance Agency is here and ready to make the process as painless as possible. We look forward to meeting you!

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