Homeowners insurance prices saw a significant jump of about 20 percent in 2024, driven by inflation in building costs, an increase in natural disasters, more homes being built in risky climate zones, and financial turmoil within the insurance industry. This has led many homeowners to switch carriers in search of better rates or due to non-renewals. Regularly shopping for insurance is a smart strategy, as loyalty to an insurer doesn’t always guarantee lower rates.
Why Homeowners Insurance Prices Are Rising
Several factors contribute to the escalating cost of homeowners insurance:
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Inflation in Building Materials and Labor: The cost to repair or rebuild homes has surged due to inflation. Between June 2019 and June 2024, construction labor costs rose 40 percent, with construction material costs increasing similarly. These higher expenses are directly reflected in policy prices.
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Natural Disasters: The increasing frequency and intensity of natural disasters (wildfires, hurricanes, floods) are causing more property damage. In 2024, the National Oceanic and Atmospheric Administration reported 28 weather disasters costing at least $1 billion each in insured losses, totaling $93 billion—a significant increase from just 5 in 2000. Climate change is widely agreed upon as a primary cause.
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More Homes in Risky Climate Zones: There’s been an “explosion” of homes built in areas prone to climate dangers. For instance, an additional 31,000 new homes have been built in Montana’s wildfire-prone zones since 2018. This combination of high risk and high costs has led some insurers, like Allstate, Farmers, and State Farm, to stop writing new policies in certain states (e.g., California, Florida), reducing market competition and driving up premiums.
- Insurers Face Financial Turmoil: Insurance companies rely on premiums, investment returns, and reinsurance to pay claims.
- Expensive Reinsurance: Reinsurance, which is insurance for insurers, has become significantly more expensive, with rates doubling between 2017 and 2023. These increased costs are passed on to consumers.
- Declining Investment Returns: Rising interest rates have negatively impacted insurers’ bond market performance.
- Capital Needs: Both factors mean insurers need more capital to cover potential claims, leading them to “raise premiums and reduce coverage.”
How to Find a Good Homeowners Insurer
Customer satisfaction with homeowners insurance is strongly correlated with premium rates and claims handling.
- Consult Ratings: Check independent homeowners insurance ratings (e.g., those by Consumer Reports) to see how major companies rank across claims handling, customer service, advice, and premiums.
- Compare Rates:
- Some state insurance departments publish rate comparisons (e.g., Florida’s Office of Insurance Regulation, California Department of Insurance).
- Get quotes from independent agents who represent multiple insurers (e.g., through Trusted Choice).
- Use comparison-shopping websites like Insure.com, NetQuote, and SelectQuote.
- Direct Application: Note that some top-rated companies (like NJM, Erie, and USAA) use their own agents and may not be listed on comparison sites; you’ll need to contact them directly.
How Much Homeowners Coverage Do You Need?
There are no state-mandated requirements for homeowners coverage, and mortgage lenders may only require 80 percent of your home’s replacement value. However, being underinsured can leave you with significant out-of-pocket costs if your home is destroyed.
- Focus on Replacement Value: Do not insure your home for its market value, as this includes the land, which isn’t at risk from perils covered by your policy. Instead, buy enough insurance to cover the labor and materials to completely rebuild your home, known as the replacement value or replacement cost. Your insurance agent can help determine this amount; be sure to mention any unique features or recent improvements.
- Loss of Use Coverage: Standard policies include “loss of use” coverage, which pays for your additional living expenses if you need to live elsewhere during rebuilding. Review this limit with your agent, as rebuilding can take longer than anticipated, especially after a widespread disaster.
Extra Homeowners Insurance Coverage to Consider
While these options will increase your premium, they can offer substantial savings if disaster strikes. Note that some insurers include these in basic coverage, while others charge an additional premium.
- Extended Replacement Cost for Your Dwelling: Pays 20 to 25 percent above your stated coverage limit if building costs soar after a major disaster. Benefits vary by state and carrier. This typically covers standard building supplies; for custom features (stained glass, antique wood floors), you’ll need additional riders or a “restoration-cost policy.”
- Guaranteed Replacement Cost: Offered by insurers for high-end homes, this pricier coverage pays the full cost of replacing or repairing a damaged or destroyed home, even if it exceeds the policy limit.
- Inflation Protection (Inflation Guard): Automatically increases your dwelling’s coverage limit to reflect rising homebuilding costs. Confirm this provision with your agent, given recent inflation.
- Earthquake, Hail, and Windstorm Coverage: Wind and hail are leading causes of claims. Depending on your state, you may need a separate deductible for hail or stand-alone policies for earthquakes and high-speed windstorms.
- Content Replacement Coverage: A standard policy often reimburses the depreciated, or actual cash value, of stolen or damaged possessions. Pay extra for replacement cost coverage to avoid paying the difference when replacing items. Create a video inventory of your possessions and store it securely.
- Additional Valuables (Floater): Homeowners policies have dollar limits on valuables like furs, firearms, and jewelry (e.g., $2,500 for stolen jewelry, often limited to theft). Purchase a “floater” to supplement coverage for costly items.
- Sewer Backup: Protects against damage from municipal line failure causing sewage backup into your home (or tree roots in the sewer line). Costs range from around $50 to several hundred dollars annually, with limits from $5,000 up to the full cost of replacing your home. Not offered in all states. Note: Standard policies generally don’t cover septic systems themselves, but will cover damage to your home from a malfunctioning system. Sump-pump malfunction damage is covered, but the pump itself isn’t.
- Ordinance, or Law and Endorsement: Provides extra coverage to rebuild your home in compliance with updated local building codes, especially useful for older homes.
Should You Get an Umbrella Insurance Policy?
The liability insurance in homeowners policies typically starts at $100,000, but you could be sued for all your assets.
- Increase Liability Limit: If your assets exceed $100,000, increase your liability limit to at least the value of your assets.
- Umbrella or Excess Liability Coverage: This provides additional liability protection beyond your home and auto policy limits, costing a few hundred dollars per year for a $1 million policy. You may need to raise your underlying home and auto liability limits first.
Do You Need Flood Insurance in Low- or Moderate-Risk Areas?
Standard homeowners policies only cover water damage from internal sources (e.g., burst pipes), not external flooding or mudflows.
- High-Risk Areas: Flood insurance is typically required if you live in a special flood hazard area with a federally backed mortgage.
- Lower-Risk Areas: Flood insurance can still be a worthwhile purchase. The National Flood Insurance Program (NFIP) reports that 40 percent of its claims originate in moderate- to low-risk flood areas.
- NFIP Coverage: Most flood policies in the U.S. are underwritten by the NFIP. Building policies cover up to $250,000, and content policies cover up to $100,000. Additional coverage can be purchased through private flood insurance carriers.
- Cost: The typical annual NFIP premium is about $700 for high-risk areas, with lower costs for moderate- to low-risk zones. Check floodsmart.gov for precise estimates.
How to Pay Less for Homeowners Insurance
- Bundle Coverage: Purchase homeowners and auto insurance from the same company for potential overall savings of up to 30 percent. Bundling boat or motorcycle insurance can increase savings.
- Raise Your Deductible: Moving from a $500 to a $1,000 deductible can reduce your premium by a double-digit percentage.
- Make Home Improvements:
- Replacing old plumbing, adding security systems, and installing water/gas-leak detection sensors can save 2 to 6 percent or more.
- Replacing a standard roof with an impact-resistant one can save up to 35 percent in some states.
- Cutting back dry brush in fire-prone areas can earn a 5 percent premium break.
When Not to Submit a Homeowners Insurance Claim
Filing multiple claims in a short period can lead to rate increases or policy non-renewal.
- Avoid Minor Claims: Don’t file claims for just a few hundred dollars above your deductible, as this could negate claim-free discounts.
- Consult Your Agent: If you’re unsure, discuss the pros and cons with an independent agent before reporting a claim.
What to Do if Your Homeowners Insurance Company Drops You
Insurers can cancel or non-renew policies for various reasons, including non-payment, misrepresentation, increased risk (e.g., trampoline, certain dog breeds), or if they’re no longer profitable in your area.
- Cancellation: New policyholders can be canceled within 60 days for any reason; after that, only for specific reasons (non-payment, lying on application, increased risk).
- Non-renewal: Your insurer can choose not to renew your policy after it expires, even for reasons unrelated to your claims history (e.g., profitability in your area). You’ll typically receive at least 30 days’ notice.
If Your Policy is Canceled or Non-Renewed:
- Confirm Expiration and Request Extension: Ask your current insurer for a 30- or 60-day extension to gain time for finding new coverage. While not required, some offer courtesy extensions.
- Gather Evidence: Request a written explanation for the non-renewal. Ask for aerial photos or drone/satellite video used in their determination, as this evidence can be crucial for an appeal.
- File an Appeal Immediately: If the reason is repair-related, gather a written inspection report from a professional and high-quality, close-up photos to counter the insurer’s assessment.
- Act Fast on Repairs: If repairs are requested, complete them without delay and send proof (photos, receipts) to the insurer promptly.
- Shop for a New Policy Concurrently: Don’t wait for your appeal’s outcome. Start looking for new insurance immediately, as you may have limited time to find new coverage.
- Find a Local, Independent Insurance Agent or Broker: They can efficiently search multiple insurers, including smaller, local companies not available online. Ask if they are truly independent (brokers for multiple insurers) or tied to just one or two.
- Explore State-Sponsored Plans (FAIR Plans): If private plans are unavailable, check if your state offers a Fair Access to Insurance Requirements (FAIR) plan. These are state-mandated plans for high-risk homeowners, available in California, Florida, Hawaii, New York, and 29 other states. They are often more expensive and offer less coverage, serving as a last resort. Consider “wraparound” policies from the private market to supplement limited FAIR plan coverage.
- Consider E&S (Excess and Surplus) Policies as a Last Resort: These policies are not state-backed, reviewed, or regulated, and may have numerous exclusions and limitations not found in traditional policies. Tread carefully. However, they might cover more types of risks, offer more protection, and have higher deductible options. If you choose this route, stick with larger, more financially stable carriers (e.g., AIG, Lloyd’s of London) to mitigate bankruptcy risk, as legal recourse is limited if they fail.
How Consumer Reports Rates Homeowners Insurance Companies
Consumer Reports’ homeowners insurance ratings, covering 28 insurance groups, are based on survey responses from members and non-members. The “Overall Satisfaction Score” is a weighted average of seven specific attributes and their Consumer Experience Score. Each rating category (claims, premiums, service, advice and help, coverage, policy review, policy clarity, website, and mobile app) reflects average scores on a six-point satisfaction scale.