Homeowners across the United States are experiencing a surge in insurance costs, with limited carrier options available in some areas. This problem is expected to worsen due to severe weather, inflation, and rising homebuilding costs, according to a new report by Insurify, a virtual insurance company. As homeowners face these challenges, it is crucial to understand the factors contributing to these rising costs and explore ways to manage them effectively.
The Growing Concern: Rising Insurance Costs
The average annual insurance rate in the United States currently stands at $2,377. However, homeowners can expect a further 6% increase in average premiums by the end of the year, on top of a 20% increase over the previous two years. Certain coastal and inland areas may even experience double-digit percentage rises in insurance rates this year, especially in states like Florida, Louisiana, and Oklahoma. Insurify’s 2024 Insuring the American Homeowner report warns that weather forecasters predict an active hurricane season, leading to additional rate increases in coastal areas through 2025.
Regions such as South Florida have already seen homeowners facing an additional $500 per month in insurance costs. Moreover, major insurers like State Farm, Allstate, and Farmers are leaving high-risk areas such as California and Florida. Since 2019, more than a dozen home insurance companies have even declared insolvency.
Betsy Stella, the Vice President of Carrier Management and Operations at Insurify, states, “It’s possible that the highest-risk areas will become uninsurable. However, where there’s demand, typically a supplier will appear. The question will be—at what cost?”
Where Insurance Costs Could Rise the Most
Insurify’s report indicates that the following areas are likely to experience the highest increases in insurance rates by the end of the year, with many facing double-digit percentage rate hikes:
- Louisiana: Projected change in 2024: 23%, Projected annual rate (2024): $7,809
- Maine: Projected change in 2024: 19%, Projected annual rate (2024): $1,571
- Michigan: Projected change in 2024: 14%, Projected annual rate (2024): $2,095
- Utah: Projected change in 2024: 13%, Projected annual rate (2024): $1,541
- Montana: Projected change in 2024: 12%, Projected annual rate (2024): $1,997
- South Carolina: Projected change in 2024: 11%, Projected annual rate (2024): $3,410
- North Carolina: Projected change in 2024: 10%, Projected annual rate (2024): $2,327
- Illinois: Projected change in 2024: 10%, Projected annual rate (2024): $2,245
- Connecticut: Projected change in 2024: 9%, Projected annual rate (2024): $1,927
- Nevada: Projected change in 2024: 9%, Projected annual rate (2024): $1,336
Priciest Areas Overall for Home Insurance
The cost of home insurance can vary significantly across the country. Vermont homeowners pay the least, with an average annual rate of $918, while Florida homeowners face the highest premiums, nearly $11,000 annually.
According to the Insurify report, states with the highest home insurance costs are often prone to severe weather events. Florida, Louisiana, Texas, Arkansas, and Mississippi are vulnerable to hurricanes, while Texas, Colorado, and Nebraska face an increasing wildfire risk. Nebraska, Texas, and Kansas, located in an area known as “Tornado Alley,” are at high risk for tornadoes.
Most areas with the highest insurance costs tend to be located in states with higher poverty rates. Six out of the ten states with the highest home insurance rates in 2023 were also among the ten poorest states in the country, based on U.S. Census Bureau data. Apart from Nebraska and Colorado, all the other states have a poverty rate higher than the national average of 11.5%.
What Homeowners Can Do
As homeowners face rising insurance rates, Insurify recommends a few strategies to help manage costs effectively:
- Gather quotes: Compare quotes from multiple insurers to find the best coverage at an affordable price.
- Add home protections: Install home-hardening features to mitigate potential damages, such as dual-pane windows with tempered glass for wildfire zones or impact windows and hurricane shutters for hurricane-prone areas. These upgrades may even qualify homeowners for discounts on their insurance premiums.
- Check coverage adequacy: Despite rising rates, it’s important not to skimp on coverage. Inadequate coverage could lead to financial hardships if disaster strikes. For example, homeowners should consider obtaining separate flood insurance policies since flood damage is not covered by standard homeowners insurance.
FAQs
Q: Will insurance rates continue to rise?
A: Yes, insurance rates are expected to continue rising, especially in high-risk areas prone to severe weather events.
Q: Are there ways to reduce insurance costs?
A: Homeowners can gather quotes from multiple insurers, add home protections to mitigate damages, and ensure they have adequate coverage suited to their specific needs.
Q: Why do certain areas have higher insurance costs?
A: Areas prone to severe weather events, such as hurricanes, wildfires, or tornadoes, typically have higher insurance costs due to increased risks.
Q: What should homeowners do if they cannot afford insurance premiums?
A: Homeowners facing financial difficulties should consult with insurance agents, explore available discounts, and consider adjusting coverage to match their budget while still maintaining adequate protection for their homes.
Conclusion
As homeowners grapple with rising insurance costs, it is crucial to understand the contributing factors and proactively manage these expenses. By exploring insurance options, adding home protections, and ensuring adequate coverage, homeowners can navigate the challenging landscape of increasing insurance rates while protecting their properties effectively.
