In light of the recent Southern California wildfires, California residents probably assume that their homeowner’s insurance premiums will be going up – but by how much, and how do California rates compare with those in the rest of the country?
Insurance comparison platform Insurify just completed a cost and projection analysis for homeowners insurance nationwide (tinyurl.com/insurifyreport). They collected insurance quotes across the 10 largest urban areas in each state over the past five years and then used the relationship between loss ratios and subsequent rate changes to project 2025 rates. The data is both illuminating and sobering.
First, the bad news: Insurigy expects California’s home insurance premiums to rise 21% by the end of this year to an average $2,930 per single-family home. That’s among the highest increases of any state and is partly due to the devastating wildfires the state has experienced as well as a new insurance model that allows insurers to take future climate risks into account when setting rates.
Surprisingly (at least to me), even after such a huge increase, California doesn’t even make the top 10 states with the highest premiums. In fact, the average premium cost in California is likely to continue to remain well below the projected average rate across the U.S. ($3,520). The most expensive state for home insurance is Florida, with a projected annual cost in 2025 of $15,460.
That’s primarily because Florida, as well as four more of the eight states with the highest 2025 premiums (Louisiana, Texas, Alabama and Mississippi), all border the Gulf Coast, an area highly susceptible to hurricanes. Hurricanes cause more financial damage than any other type of natural disaster, according to the report.
Other states with excessively high rates include Oklahoma ($8,369), primarily from tornadoes; Colorado ($6,630), from hail and wildfires; and Nebraska ($5,203), from hail and severe storms. Texas rates are high ($6,522) due to a plethora of weather-related events including hurricanes, flooding, drought, hail, tornadoes, wildfires, ice storms and even heat waves and cold waves. (Sounds like Texas is a pretty uncomfortable place to live).
Thanks to media coverage, you are probably acutely aware of the challenges that California insurers and homeowners are facing today. But that problem is by no means limited to this state. In Louisiana, 12 insurers became insolvent after Hurricane Ida struck in 2021. In Florida, 16 insurance companies have withdrawn from the state and another 16 have become insolvent since 2017.
The report also speculated on the impact of higher tariffs on home insurance rates. Canada and Mexico are major suppliers to the U.S. for sawmill, wood, lime and gypsum products, all major components used in homebuilding. Trump has also announced higher tariffs on steel and aluminum imports. The National Association of Homebuilders (NAHB) estimates that the tariffs would raise the cost of materials by up to $4 billion, increasing rebuilding costs and consequently the cost of home insurance. Note that the projected rate increases above do not include the effects of tariffs since the details cannot yet be fully be determined.
But what can you do to keep your insurance costs under control? Comparison shopping between different insurance companies and raising your deductible are simple ways to reduce premiums. You can also check with your insurer to find out if weather-resistant home upgrades (e.g. roofs, windows) will be rewarded with premium reductions.
Los Altos resident Artie Green is founder of Cognizant Wealth Advisors. For more information, visit cognizantwealth.com.
