How are home insurance costs changing across the United States

Over the past decade, home insurance costs have risen rapidly in many parts of the United States. This trend has been driven by numerous factors, including an increase in the costs associated with extreme weather events, the COVID-era spike in nationwide housing values, and high inflation rates in 2021 and 2022.

Before 2017, the five-year rolling average cost associated with billion-dollar disaster events was consistently less than $100 billion in the U.S.1In 2017, three major tropical cyclones (Hurricanes Jose, Irma and Maria), wildfires and several severe storms cost the U.S. more than $390 billion. According to the National Atmospheric and Oceanographic Administration, since 2017, the five-year rolling average cost associated with billion-dollar extreme weather events has exceeded $120 billion.2

This trend of increasing costs due to extreme weather events is likely to continue. Such events are projected to become more frequent and more severe due to climate change,3creating mounting cost pressures for federal, state, and local governments, as well as insurance companies. Many homeowners, in turn, will experience these cost pressures in the form of increased home insurance premiums.

In some parts of the country, rising insurance costs are already contributing to home affordability challenges. News articles from communities in Florida,4Iowa5and Louisiana6include profiles of homeowners who have been dropped by their insurance carriers and forced to find new policies with premiums that can sometimes be more than twice as expensive as their old coverage. Since 2018, more than 1.9 million insurance contracts have been dropped nationwide, particularly in parts of the country with high wildfire and hurricane risk.7

While those who own their homes outright can forgo insurance entirely (and more and more are),8for homeowners with mortgages, insurance is an unavoidable cost. Lenders require basic home insurance (also called hazard insurance). Homeowners in areas designated by the Federal Emergency Management Agency as at high flood risk face still higher insurance-related costs, because lenders require them to hold additional flood insurance. Additionally, in some areas, wind and hail damage may not be covered under a homeowner policy and require separate coverage.9

Rising insurance costs - and the associated affordability challenges for homeowners - are likely to have broad effects on the U.S. housing and mortgage market. Home values may fall as fewer prospective homebuyers are able to afford the insurance they need to obtain a mortgage, and home value declines could affect local government revenue streams that depend heavily on property taxes.

Because these impacts are interconnected, insurance cost increases will affect every participant and stakeholder in the U.S. housing and real estate market - from individual homeowners and lenders, to investors, local municipalities and the federal government. In the face of these challenges, it is critical for these stakeholders to understand the trends in insurance costs across the country.

1These totals are Consumer Price Index-adjusted.

2Billion-dollar Weather and Climate Disasters. National Centers for Environmental Information. National Oceanographic and Atmospheric Administration. Available at: https://www.ncei.noaa.gov/access/billions/state-summary/US

3S, S.I et al (2021)/ Weather and Climate Extreme Events in a Changing Climate. In Climate Change 2021: The Physical Science Basis. Contribution of Working Group I to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change [Masson-Delmotte, V., et al. (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA, pp. 1513-1766, doi: 10.1017/9781009157896.013. Available at: https://www.ipcc.ch/report/ar6/wg1/chapter/chapter-11

4Colin, M & Tracy M (17 Oct 2024). Florida homeowners fear soaring insurance cost after hurricanes. Reuters. Available at: https://www.reuters.com/world/us/florida-homeowners-fear-soaring-insurance-cost-after-hurricanes-2024-10-17

5Bolton, S (24 Oct 2024). Iowa homeowners reel from doubling insurance rates amid inflation, storms. KTVO.com. Available at: https://ktvo.com/news/local/iowa-homeowners-face-shocking-insurance-rate-hikes-amid-economic-challenges

6Meyersohn, N & A Bahney (26 Apr 2024). The home insurance market is crumbling. These owners are paying the price. CNN. Available at: https://www.cnn.com/2024/03/29/economy/home-insurance-prices-climate-change/index.html

7Flavell, C & Rojanasakul M (2024). Insurers Are Deserting Homeowners as Climate Shocks Worsen. The New York Times. Available at: https://www.nytimes.com/interactive/2024/12/18/climate/insurance-non-renewal-climate-crisis.html

8Cooley, P. (27 May 2024). Home insurance was once a 'must.' Now more and more homeowners are going without. The Washington Post. Available at: https://www.washingtonpost.com/business/2024/05/27/home-insurance-dropped-coverage

9Texas Department of Insurance. Home Insurance: What structures are covered? Available at: https://www.tdi.texas.gov/tips/home-insurance-structures-covered.html

10Loans that cannot be matched to a zip code-level location are excluded from this analysis. Data from counties that contain five loans or less is also excluded. ICE McDash data consists of loan level insurance costs in December of every year from 2013 to 2022, as well as monthly data from 2023 onward.

11Loans that cannot be matched to a zip code-level location are excluded from this analysis.

12Through November 30, 2024.

13Through November 30, 2024.

14Frank, T (E&E News from Politico https://www.eenews.net/articles/calif-scared-off-its-biggest-insurer-more-could-follow

15Webel, B. (2 Nov 2023). The Factors Influencing the High Cost of Insurance for Consumers. Statement before the Committee on Financial Services Subcommittee on Housing and Insurance U.S. House of Representatives. Available at: https://crsreports.congress.gov/product/pdf/TE/TE10087

16Federal Insurance Office, U.S. Department of the Treasury. Analyses of U.S. Homeowners Insurance Markets, 2018-2022: Climate-related risks and other factors. Appendix A, Table 3 ("State Insurance Rate Regulatory Regimes by Region") p 48. Available at: Analyses of U.S. Homeowners Insurance Markets, 2018-2022: Climate-Related Risks and Other Factors (January 2025)

17Federal Insurance Office, U.S. Department of the Treasury. Analyses of U.S. Homeowners Insurance Markets, 2018-2022: Climate-related risks and other factors. Appendix A, Table 3 ("State Insurance Rate Regulatory Regimes by Region") p 48. Available at: Analyses of U.S. Homeowners Insurance Markets, 2018-2022: Climate-Related Risks and Other Factors (January 2025)

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