The cost and availability of home insurance is an issue across the country, and things are likely to get worse as the number and severity of extreme weather events continue to increase.
Rick Sharga, president and CEO of CJ Patrick Company, said the challenge of finding affordable insurance – or any insurance at all – is already difficult in some of the hardest hit areas, but as rain-driven flooding increases through the middle of the country, and severe hailstorms hit the South and Southwest, there’s virtually no part of the country that’s immune.
Insurance costs are likely to go up everywhere in the U.S. in 2025 as insurers attempt to offset massive losses from recent extreme weather events, but how far they’ll go up depends on where you live.
Rates went up by 11.3% nationally in 2023 according to a report from S&P Global Market Intelligence. Sharga said the firm noted that rates went up by more than 20% in states like Texas, Arizona, and Utah; but only went up between 2-4% in Delaware, Mississippi, and Vermont.
Anecdotally, Sharga said many homeowners in states like Florida and California have reported insurance premiums doubling or even tripling in recent years (full disclosure: that happened to him in CA).
Homeowners and investors need to research what’s going on in their individual markets, Sharga said.
Texas metro areas are among the most heavily impacted by severe hail events (hailstorms where hail stones are over 1″ in diameter) that have caused billions of dollars of damage in recent years.
“But as we’ve seen from recent events like Hurricane Helene, Georgia and the Carolinas are vulnerable to storms; and last year Colorado had massive wildfires,” said Sharga. “So, insurance issues are likely to become more and more widespread.”
Natural disasters aren’t the only reason insurance rates are soaring: rising home prices are also a contributing factor. Sharga said the cost to repair and rebuild damaged homes has risen dramatically over the last decade.
Mortgage companies need to pay close attention to these insurance trends.
“Lenders need to build these higher insurance rates into their underwriting when they’re qualifying a borrower for a mortgage loan – in some markets, insurance and tax payments are almost as expensive as principal and interest payments,” said Sharga. “And mortgage servicers should be on the lookout for unexpected delinquencies from borrowers who’ve been blindsided by soaring premium costs. In some cases – especially where borrowers barely qualified for a loan – these homeowners may find that they can simply no longer afford to make their monthly mortgage payments due to rising insurance costs and property taxes.”
This could lead to more delinquencies, potentially more foreclosures, and probably more homes being listed by borrowers who have equity but not enough monthly income to stay in place.
Andrew Lokenauth is the founder of BeFluentInFinance.com and a real estate investor/landlord in New York City and Florida. He agrees that it’s not just coastal areas being affected.
“Even inland states are seeing wilder weather and rising premiums,” said Lokenauth. “Climate change is making insurance a headache everywhere. No market is truly ‘safe’ now.”
Gulf Coast states, the Carolinas, and parts of the Midwest are prone to flooding or tornadoes. In western states like Colorado, Oregon, and Washington, there are wildfire risks.
In Florida, Lokenauth said some insurers are pulling out, leaving a patchwork market with sky-high premiums.
“Florida’s a mess,” he said. “State-run insurance is picking up the slack, but it’s not sustainable long-term. Investors are getting creative, self-insuring, or using excess and surplus lines. But it’s driving up costs big time.”
Regarding potential 2025 insurance cost increases, Lokenauth said to brace yourself.
“Some areas could see 15-30% jumps as insurers adjust to new climate realities,” he said. “It’s a guessing game, but double-digit hikes wouldn’t surprise me. Maybe 20-25% in high-risk spots.”
Cassie Sheets, data journalist at Insurify, said at the end of 2021, home insurance prices averaged slightly under $2,000 annually. As of July, the average prices had risen to over $2,400.
In addition to paying more for coverage, Sheets said it could be difficult for people in high-climate-risk states, like California, to find a policy as insurers have pulled back on coverage in the state.
Sheets agreed that it’s very likely that premiums will continue to increase into 2025 as natural disasters only grow more frequent and damaging.
“Right now, people in Florida and the South are having to navigate Hurricane Helene,” she said. “Already, the average Florida homeowner pays nearly five times as much as the average American and homeowners in South Florida are paying up to seven times more.”
As of July 2024, Florida home insurance increased an average of 2% in the first half of the year, to an average of $11,163 annually. Miami home insurance has seen a 1.2% increase in the first half of 2024, rising to an average of $17,025 annually.
Recent Insurify data suggests the Gulf Coast insurance crisis is spreading from Florida and Louisiana to neighboring states, including Alabama and Mississippi.
Sheets is concerned about extreme weather in markets throughout the country.
“Hawaii home insurers had the highest loss ratio in the U.S. in 2023 after wildfires caused more than $3 billion in insured losses,” said Sheets. “Colorado is another state that is concerning. It has the second-highest property damage losses to hail, at $151 million per year. Hailstorms are becoming increasingly frequent and severe in the state.”
Sheets said as severe weather becomes more frequent, the financial solvency of insurance companies will be tested, especially newer providers in Florida who have stepped into the market recently.
