MW Where homeowners insurance costs are rising the most - and how Trump's tariffs could make them worse

Aarthi SwaminathanAndrew Keshner

'Almost no part of the country is being spared by the crisis,' consumer advocate says

When Louisiana real-estate investor Jason Gale was looking to buy a home a year and a half ago, he narrowed his search to homes that were either newly built or less than five years old.

"I knew homeowners insurance was going to be an issue," he said, in terms of finding the right coverage as well as getting a reasonable price.

His focus on relatively new construction was driven in part by firsthand experience. Gale, who is also a real-estate agent with Redfin $(RDFN)$, said he's seen an increasing number of contracts fall apart because buyers are unable to get adequate insurance coverage before closing on a home.

In New Orleans, sales were canceled for 18% of homes under contract in February of this year, according to Redfin data, up from 10% in the same month a year earlier. Part of the reason for the increase is that buyers are unable to obtain adequate coverage, Gale said.

Rising insurance costs are suffocating the housing market. In housing markets that see frequent natural disasters, such as areas of Louisiana, California and Florida, buyers are grappling with unaffordable housing due not only to high interest rates and home prices, but also to high insurance costs.

Homeowners are feeling the pinch, too, as their insurance premiums rise sharply. In Louisiana, where Gale lives, homeowners can expect insurance premiums to rise 27% over the course of 2025 to nearly $14,000, according to a new report by Insurify, an insurance startup.

'Almost no part of the country is being spared by this [insurance] crisis.'Sharon Cornelissen, director of housing for the Consumer Federation of America

And there's no end in sight when it comes to the increases in insurance costs, with premiums expected to go up even further as the Trump administration's tariffs on imported goods kick in.

The tariffs are expected to increase the cost of materials used in construction, remodeling and rebuilding. Those higher replacement costs will eventually make their way into homeowners insurance policies, experts noted, similar to the way the tariffs are expected to hit car-insurance premiums.

"Almost no part of the country is being spared by this crisis," said Sharon Cornelissen, director of housing for the Consumer Federation of America, a research and advocacy group. "If we care about housing that American families can afford, we cannot turn our heads away from our insurance crisis."

Where insurance premiums have risen the most

The housing affordability crisis has intensified over the last few years in the U.S., due in part to the spiraling cost of homeowners insurance.

Homeowners across the country have been affected by insurance hikes: Premiums increased in 95% of U.S. ZIP codes between 2021 and 2024, according to an analysis last week from the Consumer Federation of America. Homeowners paid $3,303 in yearly premiums on average last year - nearly $650 more than the $2,656 average premium paid in 2021, a 24% increase.

And it's not only in disaster-prone areas where costs are rising. Even though increases in homeowners insurance premiums may be especially stark in some states, insurance affordability is a growing problem across the country.

Perhaps the most surprising jump in premiums in recent years came in a landlocked state, the CFA's report showed. Utah saw the largest percentage increase in premiums, which climbed 59% from 2021 to 2024. In that state, people paid almost $1,800 to insure their homes last year.

Illinois and Arizona were next, with 50% and 48% increases, respectively, between 2021 and 2024. Pennsylvania premiums increased by 44%, while Nebraska and Kentucky premiums both climbed 35% over the three-year period.

More predictably, Florida and Louisiana had the highest increases in absolute dollars, the CFA found. A Florida homeowner paid nearly $9,500 on average last year to insure a home with a $350,000 replacement value, compared with $7,400 in 2021. The average premium in Louisiana last year climbed to nearly $5,400 from almost $3,800 in 2021.

Premiums are up partly because of a dramatic increase in the cost of rebuilding. Rising costs for raw materials and labor are part of the problem, according to the CFA's report. Insurers are also pricing in deeper damages because of climate change, and state regulators provide "weak" oversight, the organization said.

And while climate change intensifies the chances of flooding, homeowners insurance doesn't cover flood damage. For that, people need to buy separate flood policies, which are also increasing in price.

And premiums could rise even more due to the Trump administration's sweeping global tariffs, said Douglas Heller, the CFA's director of insurance. "The moment an insurance company finds the cost of a steel beam increases, or timber increases, that will be built into the rates," he said.

Even before the expected impact of the tariffs unveiled by President Donald Trump this month, home-construction costs were already expected to rise by as much as 6% as a result of previously imposed tariffs on goods from Canada, Mexico and China, according to an analysis by the data and analytics company Cotality. That increase amounts to as much as $22,000 in extra costs for a newly built home.

The average homeowner can expect a single-digit jump in insurance premiums this year. Even before accounting for the effects of the tariffs that the Trump administration has placed on imported goods from most countries in the world, the annual cost of home insurance is expected to increase by 8% by the end of the year, to an average of $3,520, Insurify said.

Louisiana has the largest projected increase of all the states, at triple the national average. California and Iowa follow with the second- and third-largest expected increases in homeowners insurance premiums this year, at 21% and 19%, respectively.

Source: Insurify

Insurance hikes leading to delinquencies

Rising insurance costs make it harder for some people to buy a home or stay in it - which in turn threatens the surrounding community's economic stability, said Cornelissen.

And there is evidence that rising premiums are already causing homeowners distress.

In one paper, economists from New York University, Rice University and the Federal Reserve Bank of Dallas found that higher premiums significantly increase the chances of mortgage delinquency or of prepayment, as some homeowners pay off their mortgage to avoid required insurance or move to a home with lower insurance costs.

Homeowners with higher debt-to-income ratios are more likely to miss mortgage payments, the authors noted.

Being dropped

A key reason behind the insurance crisis is that companies are pulling coverage from certain areas as natural disasters occur more frequently.

Many homeowners have been dropped by their insurance carriers over the last five years. Between 2018 and 2023, more than 1.9 million home-insurance contracts nationwide were dropped, or "nonrenewed," according to a report by the Senate Budget Committee last year.

"Areas with the highest climate risk also saw the largest increases in nonrenewals from 2018 through 2023," the report said.

Homeowners have little control over an insurer's decision to drop them.

Some homeowners have turned to their state's insurer of last resort. For instance, the California Fair Plan offers wildfire coverage to homeowners in the state. But major recent disasters in Los Angeles and elsewhere have strained resources as the number of policyholders and insurers' exposure to losses surged, the Wall Street Journal reported recently.

From the archives (January 2025): Extreme weather like California wildfires has increased homeowners' insurance costs. Now we know how much extra they're paying.

Fed up with high insurance costs, some homeowners are choosing to forgo coverage entirely. Nearly one in seven homes are uninsured, according to an analysis by LendingTree, with New Mexico, West Virginia and Mississippi having the highest shares of uninsured homes.

Because homeowners with a mortgage are typically required to have homeowners insurance, people who go without insurance likely do not have a mortgage - they may have paid it off already or used cash to buy the property.

The strategy is highly risky, said Rob Bhatt, a licensed insurance agent and writer at LendingTree. "This is putting people just one disaster away from losing the physical and financial security their home provides," he said.

There are ways to ease the price pressure, although the proposed solutions will not be easy to implement, according to the CFA report. They include improving last-resort options like the nonprofit Citizens Property Insurance Corporation in Florida and California's Fair Plan, and creating a federal-level reinsurance facility.

States must also address the sharp premium hikes, the CFA said. Insurers need state insurance officials to approve rate increases. "Regulators should be asking tougher questions and demanding more transparency," Heller said.

-Aarthi Swaminathan -Andrew Keshner

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April 08, 2025 11:13 ET (15:13 GMT)

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