Climate Risk and Home Insurance Rates in 2025

Homeowners across the U.S. have been hit hard by recent spikes in property insurance premiums, partly because of extreme weather events driven by increased climate risk.

Insurance premiums have increased 24% on average over the past few years, with many homeowners in high-risk areas seeing their premiums double or triple, according to the Consumer Federation of America.

In coastal or wildfire-prone areas, such as Florida and California, insurers have even withdrawn or refused coverage after taking huge losses from recent disasters — leaving homeowners to cover damages out of pocket.

These exploding insurance costs are one reason why at least 75% of every generation of Americans say that owning a home is becoming too expensive.

Rising premiums affect current homeowners, as well as aspiring ones. Shortly after the 2024 Los Angeles wildfires, which burned more than 16,000 structures and caused over $40 billion in insured losses, the chairman of the Federal Reserve told Congress that insurance markets were so dysfunctional that, in just a decade, prospective home buyers could be unable to get a mortgage in many high-risk parts of the country because of an inability to get insurance.

Climate change, which has caused more frequent and more destructive extreme weather events over the past few decades, is one of the main causes of the insurance crisis. In addition, Americans continue to move to areas that are prone to hurricanes, floods, wildfires, and other natural disasters, which increases the amount of property at risk.

Swiss reinsurance company Swiss Re reported that the combination of climate change and population growth in risky areas has produced a 5% to 7% annual increase in property damages — a rate that’s similar to the increase in consumer premiums.

Finally, inflation and tariffs have increased material costs that have made rebuilding significantly more expensive.

A Tough Nut to Crack

Insurance markets are complex, which makes solutions difficult. First, insurance is regulated at the state level, which means sweeping federal reform is nearly impossible. This state-by-state system also means that risk often can’t be spread effectively.

For example, if the property insurance market was national, then policyholders in Florida could share flood risk with policyholders in North Dakota, which would bring down premiums for homeowners in areas at high risk of flooding. It would likely increase premiums for homeowners in areas at low or no risk, but to a smaller degree.

But the present system essentially confines risk within individual states, meaning that risk in certain states can’t be diluted, and premiums there stay high. This system also makes it hard for state regulators to wield much authority because any insurer who feels pressured to enact reforms can simply withdraw from the state market while continuing to do business in the rest of the country.

There’s also the reinsurance problem. Reinsurance is essentially insurance for insurers. Every U.S. insurer purchases reinsurance to protect itself against massive damages stemming from a once-in-a-decade disaster, such as a big hurricane or earthquake.

The big reinsurance companies are nearly all located outside the United States, which puts them beyond the reach of U.S.-based regulators. Reinsurance is a significant driver of stateside insurance premiums. Many insurers pass on a large majority of individual premiums to their reinsurers.

Solutions to the insurance crisis are going to have to start on an individual level.

What Can Homeowners Do?

When an insurer assesses how much to charge you for insurance, they’re essentially calculating how much of a risk you are. If you live on a flood plain or seem financially unstable, you’ll seem like more of a risk, and your premium will be higher.

The most effective way to protect yourself from a big increase in your insurance premiums is to lower your risk. Here are a few ways to do that.

Improve your credit score. Many insurers check your credit score when calculating your insurance premiums, so cleaning up a middling credit score can result in big savings.

Replace your roof. The most expensive home problems usually start with the roof, and it’s the single most expensive part of a home to replace. Do everything you can to fortify your roof so insurers will view your home as a low risk. Look into what types of roofs provide the best protection where you live. In Florida, for example, insurers like homeowners to install a specific kind of hurricane-resistant roof.

Review your landscaping. If you live in an area prone to storms, think about whether you have large trees near your house that could cause damage if they fell. Similarly, if you live in a fire-prone area, assess how close your home is to the treeline, and think about the ways that fire could spread to your structure. Keep dry brush and dead trees tightly controlled, and consider putting in fire-resistant plants.

Install a security system. Many insurers will reduce your insurance premiums if you put in a security system because it reduces your home’s risk of break-ins and robberies. Many security systems also come with water- and gas-leak detectors, which also lower your home’s risk of damage.

Don’t make too many claims. While you should definitely make all significant insurance claims that you’re entitled to, insurers will often raise the rates of clients who frequently file claims. If there are smaller damages you could pay out of pocket, it might be worth it to keep your premiums down.

Get your community involved. In addition to looking at individual risk, insurers often assess the risk of the entire area. In a situation like this, it can be helpful for the community to band together and undertake risk-lowering measures. For example, homes in an area prone to wildfires could put in fire-resistant landscaping, push back treelines, or conduct controlled burns. These measures will usually require the permission and participation of local governments, but if you can mobilize the entire community, everyone will see benefits.

Written by Billy Guteng. August 22, 2025

Billy is a content writer for Kukun. He was born in France, and has lived in multiple cities around the world ever since. He loves art, design and architecture as well as construction and real estate.