likely influencing the decision for these homeowners to forgo homeowners insurance. Stevens said, “For some people who are living on a fixed income, who have seen the prices of necessities like food and energy go up significantly in the last two years, it’s one they might have to make, however reluctantly”.

Insurify, an online insurance marketplace, projects the average cost of home insurance will be $1,784 this year, 17% more than in 2021. Residents of some states are getting charged more than three times that, it said.

Homeowners living on a fixed income who cannot afford homeowners insurance are also at risk of falling behind on their property taxes. Stevens noted, “As long as you don’t have a mortgage on your house, you won’t get kicked out if you don’t pay for home insurance, but you will get kicked out if you don’t pay your property taxes”.

How a HECM can save the home

How could a reverse mortgage literally help save the home these at-risk individuals live in? Let’s do the math. Let’s say a couple has a home worth $300,000 that’s been fully paid off but they cannot afford homeowners insurance. Should they lose their home to a natural disaster or fire they could easily find themselves homeless not having the money to rebuild. However, utilizing a reverse mortgage this couple could take out an annual withdrawal from a Home Equity Conversion Mortgage’s available credit line (or principal limit) to pay the annual premiums.

This strategy would give them peace of mind and most importantly protect them from becoming permanently unhoused. Of course, the reverse mortgage’s initial closing costs, FHA insurance premiums, and accrued interest would add to the loan’s balance but they’ve succeeded in protecting what is likely their largest asset and may help ensure the home remains for their heirs to inherit.

“At lower income levels, homeowners’ insurance may be perceived as a discretionary purchase,” the Insurance Information Institute said in a report about its survey. “Weather does not discriminate by income, and low-income homeowners remain at risk… Logic would suggest that only a small proportion of low-income homeowners could withstand the total loss of their home from an unforeseen weather event without insurance coverage”, said Robert Dietz, chief economist at the National Association of Home Builders.

Conclusion

If you originate reverse mortgages in Florida, California, or any state where homeowners insurance premiums have skyrocketed you may want to consider marketing to this at-risk group. After all, a reverse mortgage could literally save the roof over their head.

Resources:
More Homeowners ‘Go Bare’ As Property Insurance Gets Pricier and Harder to Get Pricier and Harder to Find