The Best and Worst Places to Invest Based on Insurance Claim Data

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When evaluating real estate investment opportunities, it’s important to consider insurance rates and regional risks. Insurance rates and deductibles can provide insight into the likelihood of various losses in different regions, helping investors make more informed business decisions. Keep reading for a list of some of the worst and best places to invest based on these factors.

Worst Places to Invest

Insurance carriers often use regional data, including loss history and claim frequency, to determine rates. These regions are currently facing some of the highest rates and most frequent losses. 

Texas

Properties in Texas experience a high frequency of wind/hail and named storm claims, leading to some of the highest insurance rates in the country. So far, in 2024, nearly 48% of all claims submitted through our program have been due to wind/hail damage, with 46% of those incidents occurring in Texas. Additionally, nearly 50% of all claims in our program involving hurricanes or named storms have come from Texas. 

Because of this high level of risk, deductibles for wind/hail losses in this state are typically set at a minimum of $5,000 to $10,000, or around 5% of the property’s coverage amount. 

While certain areas of Texas can still offer promising investment opportunities, many parts of the state experience a high frequency and severity of weather-related events, making it one of the most challenging regions to insure. Hence, Texas currently ranks high on our worst list. 

Florida

Like Texas, Florida is heavily impacted by named storms and wind/hail events. The state has a long history of severe weather, including hurricanes, which has led to high insurance costs. For some perspective, payouts for Hurricane Ian-related losses in 2022 reached over $3 million for just one carrier, with individual claims ranging up to $180,000 for a single property. 

To manage this risk, insurance deductibles for hurricane and wind damage are similar to those in Texas, typically starting at $5,000 to $10,000, or 5% of the coverage amount. 

Challenges for Texas and Florida investors 

While properties in these states can attract tenants and vacationers due to their desirable locations, they come with higher risk and repair costs following all-too-common destructive weather events. Securing reliable contractors, accessing materials, and dealing with restricted access can further complicate recovery efforts after major storms. 

Detroit

Detroit poses unique challenges for real estate investors due to a high frequency of vandalism, theft, and fire-related claims. So far in our program this year, 31% of all theft/vandalism losses have occurred in the Detroit metropolitan area. In some cases, fires resulting from vandalism have led to total losses of the property, with one such event costing nearly $370,000 in indemnity and expenses. 

The high rate of vandalism and theft has led to standard deductibles of $5,000. Many carriers have chosen to only offer basic form policies, which do not include theft, to mitigate the level of risk they are taking on. 

Philadelphia

Philadelphia has seen a higher frequency of liability claims, from slip-and-fall accidents to dog bites and lease disputes. Nearly 30% of all liability claims reported through our program this year originated from property owners in Pennsylvania, and some have led to significant costs for insurers. For example, two separate negligence claims currently show expense amounts of $274,000 and $126,000. 

The unpredictable legal environment surrounding tenant-landlord laws and the frequency of frivolous lawsuits make this region a high risk for investors. 

Best Places to Invest

While some regions pose significant challenges due to high insurance rates and frequent claims, other areas offer more stable conditions, making them more attractive for real estate investors. We have identified several states where insurance costs are competitive, claims frequency is minimal, and opportunities for long-term investments are high. These states include:

• North Carolina
• South Carolina
• Arizona
• Utah
• Kentucky
• Tennessee 

Why these states stand out

• Lower Claims Frequency and Premiums: In these states, we’ve observed a consistently lower number of claims for natural disasters, theft, and vandalism. As a result, insurance premiums in these areas tend to be more affordable, making them cost-effective for investors.
• Appeal to Long-Term Tenants: Investors are likely to find stable, long-term tenants in these areas, thanks to the high quality of life and relatively low cost of living.
• Positive Relationships With Local Real Estate Groups: Our experience working with local investor groups in these states has highlighted the benefits of investing in these regions. Many investors find success in building portfolios with low-risk properties. 

Protecting Your Investments

No matter where you choose to invest, National Real Estate Insurance Group is here to help. Whether you invest in high-risk or low-risk areas, we work with you to secure the best coverage and rates available. With our expertise and understanding of the unique risks in each region, we offer tailored solutions and mitigation resources to help you best protect your investments.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.