State insurance plans “of last resort” are becoming financial time bombs.
The average premium for US homeowners insurance is expected to hit $2,522 this year, up 6% from the end of 2023. Premiums in Florida will approach $12,000.
The average premium for homeowners insurance in the US is expected to hit $2,522 by the end of the year, driven largely by intensifying natural disasters, rising reinsurance costs and higher fees for home repair, according to Insurify, a Massachusetts-based insurance-comparison platform. That figure would represent a 6% increase over the average US premium at the end of 2023, and follows a roughly 20% increase over the past two years.
“Many Americans are motivated to buy a home because they think their housing costs will remain fixed or stable when compared to renting,” says Cassie Sheets at Insurify, who co-authored the analysis. “But this trend of significant insurance rate hikes makes housing costs more unpredictable.”
Home insurance is becoming a flashpoint in the US as damage from thunderstorms picks up and as climate change increases the frequency and severity of natural disasters. In the 1980s, the country experienced about three disasters a year that caused damages of at least $1 billion each. In the 2010s, that climbed to 13 per year, according to the National Oceanic and Atmospheric Administration. Last year, the US endured a record 28 weather and climate disasters that caused at least $1 billion in damages each.
Responding to climate-induced threats, a growing number of insurance companies are pulling out of California and Florida, where those impacts are frequently felt. To fill the gap, state “insurers of last resort” are absorbing trillions of dollars in risk.
“It’s possible that the highest-risk areas will become uninsurable,” says Betsy Stella, vice president of carrier management and operations at Insurify. “However, where there’s demand, typically a supplier will appear. The question will be, at what cost?”
Rather than calling it a “hidden crisis,” I think this is the first personal experience many people have to deal with rather than think of in terms of other people’s problems. You can ignore adding solar or switching to EVs or getting rid of your gas appliances, but this is a bill that comes due for anyone running a business or holding a mortgage on their homes.