Homeowners' Insurance Rates Are Rising. What Does That Mean for You?
You’ve probably noticed that insurance premiums are on the rise. And fast.
While auto insurance and health care plans have seen upticks, one of the most dramatic spikes has been in homeowners' premiums, especially in areas vulnerable to natural disasters. Wildfires, hurricanes and other major weather events are driving rates higher from Florida to California. Across the country, homeowners have experienced 24% average increases over the past three years, with some states seeing increases of more than 50%.
Those higher insurance bills are having a meaningful impact on household budgets. As of last July, insurance premiums accounted for more than 9% of the average monthly mortgage payment for a single family residence—the highest figure on record. Much of this is tied to natural disasters, which have not only increased insurer payouts but have also driven up the cost of reinsurance (insurance for insurance companies).
Unfortunately, this trend doesn’t show any signs of reversing. And if the damage in eastern Tennessee and western North Carolina from 2024’s Hurricane Helene taught us anything, it's that extreme weather can hit in unexpected places. No matter where you live, it’s worth considering how rising insurance costs could impact your financial picture.
Check Your Policy
For many, the most immediate effects of rising homeowners rates will be on their primary residence. If you're facing rising rates—or your location suggests you might in the future—several strategies can help manage costs while keeping you well protected.
Start by taking a fresh look at your current insurance policy. Review your coverage to make sure it aligns with your actual needs. Remember that being under-insured can also expose you to risk. If standard policies no longer cover certain events, look at whether umbrella policies or supplemental coverage might be able to fill the gaps.
Homeowners' policies often don’t cover flooding or earthquakes, for example. If you live in an area prone to these events, you may need separate policies for adequate insurance. Once you’re sure you’re not over- or under-insured, you can do some comparison shopping to see whether other providers offer better rates for equivalent protection. An insurance agent can be a big help in this area, pointing you toward policies with coverage you need at competitive rates.
Aside from shopping for cheaper coverage, one way to lower premiums is by increasing your deductible. Doing so means you’re taking on more of the risk of loss yourself. But pairing a higher deductible with a dedicated savings plan for insurance-related expenses may help you managed increased costs.
If you have plans to relocate in retirement, you may also want to factor insurance costs into that decision. For instance, while Florida has long attracted retirees with its favorable taxes and relatively low cost of living, homeowners are facing more challenges finding—and affording—insurance.
Check Your Real Estate Investments
Real estate may also be part of your investment portfolio. Here, rising insurance rates can also pose challenges: Bigger insurance bills can directly eat into cash flow from rental properties. If you’re a landlord, you may be able to offset this cost by raising rents or, for commercial properties, adjusting lease agreements to shift insurance obligations to tenants. What’s more, as insurance becomes expensive or even inaccessible in certain areas, property valuations may suffer, potentially impacting real estate’s effectiveness as a long-term investment.
To combat these issues, consider geographic diversification in your portfolio as different regions face varying risks. A note of caution: As you research locations, bear in mind that lists of average insurance premiums can be misleading due to varying coverage requirements from state to state. Hawaii, for instance, technically offers the lowest average rates nationally, but basic plans don’t cover wind risk, which is a major concern there. Again, an insurance agent can help draw your attention to coverage gaps likes these.
Adapting your financial plan to today’s evolving insurance landscape starts with understanding how these rising costs affect you. The right strategy depends on your goals, location and broader financial picture. If you’d like help evaluating your options and building resilience into your plan, we’re here to help.
We offer a complimentary 15-minute call to discuss your concerns and share how we can help.
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