Homeowners insurance costs have soared. Here’s why

Homeowners insurance costs have been rising fast in the U.S. — and policyholders are taking notice.

About 71% of homeowners said the cost of their homeowners insurance has increased over the past few years, with 42% saying costs have gone up “a lot,” according to a new survey by the Pew Research Center. The nonpartisan research group polled 3,524 U.S. adults, including 1,236 homeowners, from March 16 to 22.

The data backs up that perception.

Insurance premiums jumped by $648, or 24%, to $3,303 per year between 2021 and 2024, on average, according to a report published last year by the Consumer Federation of America, a consumer advocacy group.

Average premiums per policy increased 8.7% faster than the rate of inflation from 2018 to 2022, the U.S. Treasury Department said in a report published last year, which the agency billed as the most comprehensive analysis to date of the homeowners insurance market.

Consumers generally buy homeowners insurance as a form of financial protection against unexpected physical damage to their house. Mortgage lenders also often require prospective homebuyers to buy such an insurance policy to secure a loan.

Insurance experts point to a number of factors underpinning the run-up in premiums.

To name a few: General inflationary pressures in the U.S. economy have increased the cost of rebuilding homes. Climate change is increasing the frequency and severity of storms and wildfires, in turn raising costs for insurers, who then pay out more money for insurance claims. Reinsurance rates — the rates for the insurance that insurers purchase as a financial backstop — have also increased.

Meanwhile, people are choosing to move into riskier areas, and insurers have increasingly leveraged technology that influences how they predict and gauge risk, experts said.

Many households are seeing their rates rise much more rapidly than others.

Consumers in a third of ZIP codes across the country saw premiums rise by more than 30% from 2021 to 2024, with the sharpest increases in Utah at 59%, Illinois at 50%, Arizona at 48% and Pennsylvania at 44%, according to the Consumer Federation of America report.

However, no matter where they live, most homeowners are exposed: Over that 2021 to 2024 time frame, premiums increased in 95% of U.S. ZIP codes, the group found.

“It’s definitely a pervasive issue,” said Amy Bach, co-founder and executive director of United Policyholders, a consumer advocacy group for insurance policyholders. “At this point, rates have been going up by so much, it just feels unfair.”