Where to Invest (and Avoid) Based on Insurance Claim Trends

When assessing real estate investment opportunities, it's essential to factor in insurance rates and local risks. Insurance costs and deductibles offer valuable insight into the probability of various losses in different areas, helping investors make well-informed decisions. Below is a list of the best and worst places to invest based on these considerations.

Worst Places to Invest

Insurance providers use regional data, such as historical losses and claim frequency, to determine their rates. These regions currently face some of the highest insurance costs and most frequent claims.

Texas

Texas experiences a significant number of wind, hail, and named storm claims, resulting in some of the nation’s highest insurance rates. In 2024 alone, nearly 48% of all claims filed through our program have been due to wind and hail damage, with 46% of those claims occurring in Texas. Furthermore, almost half of the hurricane or named storm-related claims in our program originated from Texas.

Due to this high level of risk, wind and hail deductibles in Texas typically range from $5,000 to $10,000 or about 5% of the property’s coverage amount.

Although some areas in Texas still offer good investment potential, the state’s high frequency of severe weather makes it one of the most difficult regions to insure. As a result, Texas ranks high on our list of worst places to invest.

Florida

Similar to Texas, Florida is heavily affected by named storms, hurricanes, and wind-related incidents. Florida's history of extreme weather has driven up insurance rates. For example, Hurricane Ian-related payouts in 2022 exceeded $3 million for one insurer alone, with individual property claims reaching as high as $180,000.

Hurricane and wind damage deductibles in Florida resemble those in Texas, generally starting at $5,000 to $10,000, or 5% of the property’s coverage.

Challenges in Texas and Florida

While these states may be attractive to tenants and tourists, their frequent severe weather events result in higher repair costs and risks. Securing reliable contractors and materials post-disaster can also be a challenge, further complicating recovery efforts.

Detroit

Detroit presents unique difficulties for investors, with a high rate of vandalism, theft, and fire claims. This year, 31% of theft or vandalism losses in our program occurred in the Detroit metropolitan area. In some instances, vandalism-induced fires have led to total property losses, with one such case costing over $370,000 in damages and expenses.

The prevalence of theft and vandalism has led insurers to implement standard deductibles of $5,000. Additionally, many insurance providers only offer basic policies in Detroit that exclude theft coverage due to the elevated risk.

Philadelphia

Philadelphia has seen an increase in liability claims, from slip-and-fall incidents to dog bites and lease disputes. Around 30% of all liability claims in our program this year have come from Pennsylvania property owners, some of which have resulted in significant payouts. For example, two negligence claims are currently nearing settlement costs of $274,000 and $126,000, respectively.

The complex legal landscape around landlord-tenant laws and the high frequency of lawsuits make Philadelphia a particularly risky area for investors.

Best Places to Invest

While some regions are plagued by high insurance costs and frequent claims, other areas offer more stability and affordability, making them attractive for real estate investors. We have identified several states with competitive insurance rates, low claim frequencies, and great opportunities for long-term investments:

North Carolina

South Carolina

Arizona

Utah

Kentucky

Tennessee

Why These States Are Ideal

Lower Claims and Premiums: These states consistently report fewer claims for natural disasters, theft, and vandalism, leading to lower insurance premiums and making them more cost-effective for investors.

Appeal to Long-Term Tenants: With their high quality of life and lower cost of living, these areas are appealing to stable, long-term tenants.

Strong Relationships with Local Real Estate Groups: Our collaboration with local investor networks in these states has underscored their advantages. Many investors have built successful portfolios with low-risk properties here.

Protecting Your Investments

Regardless of where you decide to invest, National Real Estate Insurance Group is ready to support you. Whether you're investing in high- or low-risk areas, we’ll work with you to find the best insurance coverage and rates. Our expertise and deep understanding of regional risks allow us to provide tailored solutions to safeguard your investments.

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