As many people know, several suburban housing areas near Los Angeles have burnt down as fires tear through the area. This sucks for all of those people – and hopefully they are otherwise okay – but what is maybe a little less talked about is how several weeks or months ago, insurance companies stopped insuring houses in this region due to the severe implications of various local government decisions which made these houses far too risky to insure.
Now, to be clear, I don’t stay fresh on the news cycle, so there are probably many details that I am missing here in my armchair in Colorado. But it did get me thinking (“always a dangerous thing!”).
Fuck right off with this idea that buying a house magically makes you wealthy. It’s all fun and games and renting is ‘throwing money away’ until your homeowner’s insurance decides to stop insuring you, and a fire comes through and wipes out your life savings. This isn’t to insult those who were unfortunate enough to experience this blaze, and as always, it’s not to say you should never own a house. But this sentiment – endemic to American culture – that smart people buy houses and everyone else is a stupid idiot needs to die. Because what nobody talks about is your risk profile, and far too many people make money from selling houses to address this. Everybody wants to keep those hinges greased, and so the truth gets swept under the rug.
Insurance companies are not inherently evil, but they are inherently way more powerful than you are. That’s the scary thing about insurance, and why you should try your best not to rely upon it. But when you then wrap a big, hulking asset that has the power to decimate your life savings and future in an insurance policy, you had better be damned sure that policy is going to hold up in the court of law, and the fact that the insurance companies were able to rug pull all of those people – whether you think that should be possible or not – should make you think twice before buying a house. Never forget, NEVER FORGET that pandemic insurance policies were a thing pre-2020, and the first thing insurance companies did in 2020 was deny pretty much all pandemic insurance claims.
I hope that all of my friends who own houses will benefit greatly from them, but the rough truth is that houses don’t automatically do this, even if people like to think they do.
I think people get far too flippant with insurance. They say, “Oh, but the insurance will pay for it!” Are you absolutely sure about that? Because when this house needed a new roof, the insurance company weaseled out of paying for the whole thing, and my friend who owns the house had to pay quite a hefty sum. That’s one small (and even fairly minor) anecdote in a sea of experiences. That sucks, but that’s also life, and people don’t think that will happen to them.
If you have a homeowner’s insurance policy, do you know what it covers? Accidents? Fires? Floods? Earthquakes? A vehicle ramming through the front of it? [Fun story, a guy once drove into and knocked over the tree in our front yard one night back when I was in middle school, but fortunately he didn’t hit the house]. You’d better read that policy! And you might want to know what you would need to do in a pinch if they denied your claim, and how you could lawyer up, and how much that would cost. As I’ve mentioned before, the companies don’t make money paying out for every spurious claim people submit to them, so it’s imperative that you have realistic expectations. And even if your house was destroyed in a fire and the insurance covered it, would they pay for your temporary housing in a hotel or apartment for X number of months while the paperwork settles? Do you know how things would work? Would you pay to rebuild on the property? Would you HAVE to rebuild on the property?
Now, since most of those houses were owned by celebrities and other wealthy people, there have been numerous memes showing no soft feelings toward them. But I also believe, quite reasonably, that probably many of them were almost-average Joes, maybe earning more than average, who pushed themselves, clawed their way into owning one of those multi-million dollar houses, though it cost them everything, and now they’ve lost it all. There’s a very old aphorism about not putting all your eggs in one basket, but people do it all the time. HoUSeS aLWayS gO uP!! These almost-average Joes, more specifically, likely bought the lie, and now they’ve lost everything. I feel sorry for them.
Last year, I watched a YouTube video where the guy who runs the channel arranged to meet up with one of the local firefighters in Maui who had access to the area where the fire there had swept, nearly a year after it had happened, and he talked about the local conditions, how people were doing, how bad the fire had been, etc. On barely enough income, he and his wife had lived in an $800,000 house, which – if I remember correctly – had not been insured against fire, so they were out all of that money, and probably still owed on it, with no real way to rebuild. He seemed like a nice guy, so it’s nothing against him, I’m just mind-blown that people take such huge risks. I seriously, cannot wrap my mind around why so many people are obsessed with owning a house. I…I don’t get it.
Anyway, I’m getting worked up again, so I’ll cap this here. There’s nothing wrong with owning a house if you want one and can afford it, but for the love of all that is good, think clearly about what you are getting yourself into and how it might go sideways. Going half a million dollars or more in debt carries tremendous risk, and you’d better hope you have the circumstances to deal with that risk if it visits you.