Why are home insurance rates going up: A factual guide

If you’ve recently opened your home insurance renewal notice and gasped at the higher premium, you’re not alone. Homeowners across the United States are seeing their home insurance costs climb. And it’s leaving many wondering: Why are home insurance rates going up so much? 

Let’s explore the factors driving these rate increases and answer some common questions about homeowners insurance.

What’s the average cost of home insurance in the U.S.?

The average cost of homeowners insurance in the U.S. is about $125 to $206 per month, or $1,500 to $2,480 per year. However, this varies widely by state. For example, homeowners in Oklahoma and Kansas pay significantly more due to the risk of tornadoes, while those in Oregon and Idaho enjoy some of the lowest home insurance rates in the country. 

Other states that offer low home insurance rates are Utah, Wisconsin, and Vermont. All these states benefit from relatively mild weather and a lower risk of natural disasters, which keeps premiums low.

Conversely, high premiums in some U.S. states are largely due to the significant risk of severe weather-related events such as tornadoes, hurricanes, and severe storms in these regions.

What are the factors that affect homeowners insurance costs?

Several key factors play a role in determining your homeowners insurance premium. Understanding these can help you make informed decisions and potentially lower your home insurance costs.

• Location: Your home’s state and even its zip code can significantly impact your insurance rates. For example, areas prone to natural disasters or extreme weather events often face higher premiums.
• Coverage limits: The level of coverage you select, such as replacement cost versus actual cash value, directly influences your premium.
• Deductibles: Opting for a higher deductible can lower your premium, but it also means you’ll pay more out-of-pocket if you are filing a claim.
• Home characteristics: Factors such as your home’s age, size, construction materials, and safety features (such as a home security system or storm shutters) can affect your insurance costs.
• Claims history: A history of filing claims may result in higher premiums, as insurers view you as a higher risk.
• Credit score: In many states, your credit score can also influence your home insurance premium, with better scores often leading to lower rates.

Why are home insurance rates going up?

Extreme weather events and natural disasters

Climate change is here, and it’s hitting hard. From hurricanes in Florida to wildfires in California, extreme weather conditions are becoming more frequent and severe. According to S&P Global, the U.S. experienced over $100 billion in weather-related damages in 2023 alone. Insurance companies are paying out more claims than ever. Of course, those costs are being passed on to homeowners in the form of higher home insurance premiums.

States such as Florida, Texas, and California, which are prone to hurricanes, tornadoes, and wildfires, are seeing some of the steepest rate increases. In fact, Florida currently has the highest homeowners insurance rates in the nation, with average annual premiums exceeding $4,000. Ouch!

Rising costs of building materials and skilled labor

If you’ve tried to renovate or repair your home recently, you’ve probably noticed that everything costs more. The supply chain disruptions caused by the pandemic, combined with growing inflation, have driven up the cost of building materials such as lumber, steel, and roofing supplies. Add in the shortage of skilled labor, and you’ve got a perfect storm for higher construction costs. When insurance companies calculate your premiums, they consider how much it would cost to rebuild your home if it were destroyed. With materials and labor costs soaring, insurers are raising rates to keep up.

Water damage claims are on the rise

Believe it or not, water damage is one of the most common—and costly—home insurance claims. Burst pipes, leaky roofs, and flooding can cause extensive damage, and the repairs are often expensive. According to the Insurance Information Institute, the average water damage claim is around $12,000, making it the most costly homeowners insurance claim after natural disasters. As more homeowners file claims for water damage, insurance companies are raising rates to offset these payouts.

Increased risk in areas

If you live in an area prone to natural disasters, you’re likely already paying more for insurance. But as climate change increases the frequency and severity of these events, even traditionally low-risk areas are being reclassified as high risk. This means higher premiums for more homeowners, even if they’ve never filed a claim.

Insurance companies are feeling the pressure

The property and casualty insurance industry has taken a beating in recent years. Between massive payouts for natural disasters and rising operational costs, many insurers are struggling to stay profitable. To compensate, they’re raising premiums, tightening coverage options, and even pulling out of high-risk states altogether. For example, several major insurers have reduced their presence in Florida and California due to the high risk of hurricanes and wildfires.

What can you do to lower your home insurance costs?

While you can’t control the weather or the cost of building materials, there are steps you can take to keep your homeowners insurance rates in check. 

• Increase your deductibles. Opting for a higher deductible can lower your premium. However, it’s essential to ensure that the deductible is affordable in the event of a claim.
• Invest in home improvements that mitigate risks, such as installing storm shutters or reinforcing the roof. This can lead to discounts on premiums.
• Bundle your insurance policies. Many insurers offer discounts for bundling home and auto insurance policies. It’s a simple way to save.
• Maintain a good credit score. It can positively impact insurance rates.
• Shop around for the best policy. Regularly compare quotes from different insurance companies. It ensures you’re getting the best rate for the coverage you need. An insurance agent can help you find the best deal.
• Avoid filing small insurance claims. While it’s tempting to file a claim for minor damage, frequent claims can lead to rate increases. Save your claims for major issues.

Read more: Home replacement cost estimator

Quick recap: Key takeaways

• Florida has the highest homeowners insurance rates in the U.S.
• Water damage is the most costly homeowners insurance claim after natural disasters.
• Factors such as extreme weather, building material costs, and supply chain issues are driving up premiums.
• It’s best to take guidance and valuable insights from an experienced insurance agent. They can help you understand policy details and identify potential discounts. More importantly, they will ensure you have adequate coverage without overpaying.

The bottom line

Rising home insurance premiums are a frustrating reality for many American homeowners. That said, by staying informed and proactive, you can navigate the rising costs of home insurance and ensure your home is protected without breaking the bank. 

While it’s tempting to cut corners on coverage to save money, remember that your home is likely your most valuable asset. Adequate insurance is essential to protect your home and belongings. And your peace of mind.

Written by Ramona Sinha. March 18, 2025

Ramona is the Senior Content Writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. She has written articles covering a broad range of topics, such as real estate, lending and mortgage, finance, business, taxation, home designs, home improvement projects, decor concepts, and more. An avid traveler, she’s a digital nomad at heart and an animal lover from the depth of her soul.