Soaring Home Insurance Costs Could Push Homeowners Out of These 10 States – Insurify

Homeownership has long been a key tenet of the American dream. But, for many Americans, it’s a milestone that’s increasingly difficult to achieve. Over the past decade, home prices have nearly doubled, according to the Case-Shiller U.S. National Home Price Index.

The housing market saw a buying frenzy when mortgage rates fell to record lows in 2020 and 2021. Homebuyers rushed to lock in rates of 2% to 3%, often paying over asking or buying sight unseen.

Nearly 75% of people who bought real estate in 2020 and 2021 have regrets about their purchases, with 30% saying they spent too much money, the 2022 American Home Buyer Survey by Anytime Estimate reveals.[1] The rising cost of home insurance presents another obstacle, especially for homebuyers who pushed their budgets to the limit to secure a low mortgage rate.

Insurify’s data science team analyzed the average home insurance cost by state for $300,000 properties across the U.S. and compared local wage growth to rate increases to determine the most and least affordable states for home insurance. When comparing housing affordability by state, a pattern emerged among the most expensive.

Climate catastrophes are driving up home insurance rates

As climate change progresses, the frequency and severity of destructive weather events have increased, making more areas high-risk and unprofitable for insurance companies. Climate catastrophes are driving insurance crises in California and Florida, with numerous insurers not renewing customers or exiting the states entirely.

States with less severe weather might not see insurance premiums skyrocket yet, but “no part of the country is safe from climate disasters,” warns the First Street Foundation’s Climate Abandonment Areas report.[2]

The 10 least affordable states for homeowners insurance

1. Florida

Average annual home insurance cost: $9,213

Home insurance cost compared to the U.S. average: 421% higher

Affordability score: 0.0

Florida saw severe weather damages exceeding $15 billion in 2023, including $3.6 billion from Hurricane Idalia.[3] Several major home insurers stopped renewing certain policies or left Florida entirely, and rates increased by 14% in 2023 — making Florida the most expensive state for home insurance.

Due to high hurricane risk, Farmers stopped offering home, auto, and umbrella policies in July 2023.[4] Progressive also didn’t renew approximately 100,000 high-risk home policies. With few private options for homeowners insurance, more than 1.4 million homeowners have turned to the not-for-profit Citizens Property Insurance Corp., Florida’s insurer of last resort.

Insurance fraud is also driving up rates in the state. Bankers Insurance Group stopped writing home insurance policies in Florida due to fraud.[5] Last year, Florida’s government passed multiple pieces of legislation aimed at combating frivolous lawsuits and stabilizing the insurance industry.

2. Oklahoma

Average annual home insurance cost: $4,782

Home insurance cost compared to the U.S. average: 170% higher

Affordability score: 6.0

Oklahoma’s average annual home insurance rate skyrocketed 24% in 2023 and is now the second-highest in the nation. When asked about the reason behind rising home insurance costs, Oklahoma Insurance Commissioner Glen Mulready told Oklahoma’s News 4 that “the number one word would be weather.” Mulready also cited the increasing cost of building materials due to inflation.[6]

In February 2023, tornadoes and storms caused severe wind gusts of 55 to 85 mph and golf-ball-sized hail.[7] In June, severe storms produced $3.8 billion in damage across the Central and Southern U.S. Most of the damage from the June storms occurred in Oklahoma, according to the National Oceanic and Atmospheric Administration (NOAA).[8]

The median home value in Oklahoma is nearly 50% lower than the national average, according to U.S. Census Bureau data. However, with insurance rates surging, homeownership in Oklahoma isn’t as attainable as property values suggest.

3. Mississippi

Average annual home insurance cost: $4,017

Home insurance cost compared to the U.S. average: 127% higher

Affordability score: 17.3

Mississippi homeowners saw an average insurance rate increase of 23% in 2023. Increases were likely fueled by what the National Weather Service called “unprecedented, historically destructive severe weather” throughout the Deep South in June 2023.[9]

Mississippi has the second-lowest cost of living in the U.S., according to the Council for Community & Economic Research (C2ER). However, the median household income in Mississippi is $52,985, and nearly 20% of the population lives in poverty, U.S. Census Bureau data shows. Mississippi home insurance rates increased 433% more than income in the state in 2023.

4. Texas

Average annual home insurance cost: $3,969

Home insurance cost compared to the U.S. average: 124% higher

Affordability score: 23.3

Texas home insurance rates increased by 18% in 2023 — 452% more than wage growth. The state experienced 16 weather events in 2023, causing more than $1 billion of damage each. In total, these weather events cost $56.9 billion, according to the NOAA.[10]

Texas regulators approved some of the most significant home insurance rate increases in the first half of 2023, according to an analysis by S&P Global.[11] Among the 39 approved increases in the Lone Star State, Allstate received the highest hike, at 24.1%.

Home insurance in Texas now costs nearly $4,000 annually. Texas is already prone to hurricanes and flooding, resulting in expensive insurance claims. Residents could continue to see premium increases as climate change increases the severity of weather events.

5. Kansas

Average annual home insurance cost: $3,245

Home insurance cost compared to the U.S. average: 83% higher

Affordability score: 29.8

Kansas home insurance rates increased by 19% in 2023, influenced by severe weather. FEMA issued a major disaster declaration for 20 Kansas counties impacted by storms, winds, tornadoes, and flooding in July. In October, severe winds and baseball-sized hail damaged up to 70% of homes in Lewis, Kansas, local station KSN reported.[12]

Kansas is also prone to wildfires, especially during persistent droughts. Governor Laura Kelly issued emergency declarations in April, June, and September as officials battled fires across the state.

The median home value in Kansas is 40% lower than the national average, according to U.S. Census Bureau data. However, given that home insurance rates in the state are 83% higher than the national average, buying a house in Kansas might not be the steal it seems to be on the surface.

6. Georgia

Average annual home insurance cost: $2,173

Home insurance cost compared to the U.S. average: 23% higher

Affordability score: 33.5

Georgia homeowners insurance rates spiked by 17% in 2023. The median household income rose just 2.6%, according to Bureau of Labor Statistics (BLS) wage increase estimates and U.S. Census Bureau data.

Hurricane Idalia hit the state — but it wasn’t the only severe weather event last year. In total, Georgia experienced 12 natural disasters in 2023 that caused at least $1 billion in damage each, for a total of $38 billion, according to NOAA data.[13]

In June, Farmers Insurance attempted to non-renew policies for Georgia homes with roofs older than 15 years. However, after Georgia Insurance and Fire Safety Commissioner John King said the attempt was “against Georgia law,” Farmers abandoned the plan.

7. Nebraska

Average annual home insurance cost: $3,519

Home insurance cost compared to the U.S. average: 99% higher

Affordability Score: 35.5

Nebraska homeowners insurance is nearly twice as expensive as the national average. The average annual rate increased by 14% in 2023.

Like many Great Plains states, Nebraska experiences severe weather during all seasons. Snow, ice storms, and blizzards are common in winter. During warmer months, the state is prone to hail, flash floods, wind, and tornadoes. In October 2023, high winds caused downed power lines and trees in eastern Nebraska, and a storm from the Central Rockies brought quarter-sized hail.

Nebraska temperatures are now generally comparable to the 1930s Dust Bowl era and have risen more than 1.6°F since the beginning of the 20th century, according to an NOAA National Centers for Environmental Information (NCEI) report.[14] The NCEI projects that extreme precipitation events and flooding will increase as climate change progresses.

8. Massachusetts

Average annual home insurance cost: $1,649

Home insurance cost compared to the U.S. average: 7% lower

Affordability Score: 39.3

Unlike the other states featured in this study, home insurance rates in Massachusetts are lower than the national average. However, costs increased at a 582% higher rate than income in the state — the largest gap between insurance rate hikes and wage growth in 2023.

Massachusetts saw a slew of flooding throughout the summer of 2023, the second-wettest on record in Boston. Notably, a separate flood insurance policy, not standard homeowners insurance, typically covers flooding. Massachusetts faces other challenges, including extreme storms, rising heat, and wildfire risk.

The state implemented the ResilientMass Plan last year.[15] The plan aims to fortify Massachusetts properties against an increase in severe weather events by updating building codes and looking into buyout programs for high-risk areas.

9. New York

Average annual home insurance cost: $1,942

Home insurance cost compared to the U.S. average: 10% higher

Affordability Score: 42.1

New York is home to the most expensive metro area in the U.S. (New York City), according to the Council for Community and Economic Research (C2ER) Cost of Living Index.[16] Unsurprisingly, home insurance is more expensive there than the national average.

The overall cost of living isn’t the only factor driving up rates. Damaging floods swept through the Lower Hudson Valley in July 2023, and severe rainstorms shut down parts of the New York City subway system, flooded streets and highways, and delayed flights in September 2023.

Additionally, Upstate New York continues to face damaging, and many times fatal, blizzards that result in thousands of dollars of property damage. Following a Christmas weekend blizzard in 2022, Buffalo residents asked their city to pay at least $248,000 in blizzard property damage claims, The Buffalo News reported. The occurrence of such weather events drives up the risk of claims and, consequently, home insurance rates.

10. Colorado

Average annual home insurance cost: $3,308

Home insurance cost compared to the U.S. average: 87% higher

Affordability Score: 45.7

Colorado premiums have increased significantly over the past several years as insurers struggle with profitability, according to the Colorado Division of Insurance Homeowners’ Insurance Availability Study.[17] Wildfire activity exacerbated high loss ratios, and homes in high-risk areas could face dwindling coverage choices if the trend continues.

Colorado saw a year of extreme cold snaps, temperature swings, and heavy rainfall in 2023. The state experienced the fourth-wettest May on record. The following month, three-to-four-inch hail pelted the Eastern Plains.

Climate change intensified severe weather conditions, Dr. Russ Schumacher, Colorado’s state climatologist, told ABC Denver 7. “The wet years get wetter, the dry years get drier, maybe the average doesn’t change that much, but you end up with greater variability and more extremes,” said Schumacher.[18]

The 10 most affordable states for homeowners insurance

1. New Hampshire

Average annual home insurance cost: $1,190

Home insurance cost compared to the U.S. average: 33% lower

Affordability Score: 100.0

New Hampshire homeowners pay over 30% less for home insurance than the national average. A couple of factors could influence the state’s lower costs. Burglary rates in New Hampshire are 72.8% lower than the national average, according to Federal Bureau of Investigation (FBI) crime data.[19]

Insurers often factor in credit history when setting rates, so greater financial stability could contribute to lower homeowners insurance costs in New Hampshire. The state’s median income for households is $90,845 — nearly 21% higher than the national average, according to U.S. Census Bureau data.

New Hampshire isn’t immune to severe weather, floods, tornado touchdowns, or extreme temperature fluctuations. However, insurers might view the state as an overall lower climate risk. New Hampshire’s coastal counties have a “relatively moderate” FEMA risk rating compared to the “relatively high” Middlesex County rating in neighboring Massachusetts.

2. Minnesota

Average annual home insurance cost: $2,142

Home insurance cost compared to the U.S. average: 21% higher

Affordability Score: 95.4

Homeowners insurance in Minnesota is more expensive than the U.S. average. However, wages rose 356% more than insurance rates (which declined slightly) in 2023. Like New Hampshire residents, Minnesotans have a higher-than-average median household income — $84,313 compared to $75,149 nationwide, according to U.S. Census Bureau data.

Minnesota law prohibits homeowners insurance companies from adjusting rates based on the geographic location of the town, the age of construction, different ZIP codes within the same town, previous coverage denials, and the fact that a property was previously insured under the Minnesota FAIR Plan.[20]

The Minnesota Department of Commerce ordered Liberty Mutual to refund $7.7 million in premiums to Minnesota policyholders in October 2023. The insurer violated multiple state laws, including using tenancy status to make decisions about discounts for bundling home and auto insurance, the order alleged.

3. Vermont

Average annual home insurance cost: $914

Home insurance cost compared to the U.S. average: 48% lower

Affordability Score: 94.3

Vermont homeowners have the lowest home insurance rates in the U.S., at an average of less than $1,000 per year. All Vermont counties are at a “very low” or “relatively low” risk of flooding, according to FEMA’s National Risk Index.

However, after catastrophic flooding across the state in July 2023, Rob Moore, a senior policy analyst at the National Resources Defence Council (NRDC), questioned FEMA’s risk rating and out-of-date flood maps.

“Because Vermont and FEMA’s flood policies fail to anticipate and account for climate change, more people’s homes are flooding, the amount of damage may be more severe than in years past, and the recovery time will be a lot longer,” wrote Moore in an NRDC blog post.[21]

4. Maine

Average annual home insurance cost: $1,169

Home insurance cost compared to the U.S. average: 34% lower

Affordability Score: 93.3

Home insurance in Maine costs about a third less than the national average. Like its neighbor, New Hampshire, Maine’s rates are significantly lower than East Coast states farther south.

Maine is prone to winter storms and saw an unusual number of flash floods in 2023, but every county in the state has a “very low” or “relatively low” FEMA risk rating. However, coastal homeowners in Maine face erosion issues as sea levels rise.[22]

Population density could also factor into Maine’s low rates. The state is the 13th least densely populated in the country, according to U.S. Census Bureau data. Insurers pay out less in claims when disasters occur in sparsely populated areas where fewer people are affected.

5. Connecticut

Average annual home insurance cost: $1,583

Home insurance cost compared to the U.S. average: 11% lower

Affordability Score: 90.2

Connecticut has a competitive insurance market that could give homeowners more options for coverage and contribute to lower average rates. Hartford, nicknamed the Insurance Capital of the World, is home to numerous insurance company headquarters.

Connecticut’s burglary rate is just over half of the U.S. average, according to FBI data. Personal property coverage generally protects against theft, so a lower burglary rate means less risk for insurance companies.

6. Utah

Average annual home insurance cost: $1,018

Home insurance cost compared to the U.S. average: 42% lower

Affordability Score: 89.5

Home insurance in Utah costs just over $1,000 annually on average. The state’s burglary rate is nearly 30% lower than the U.S. average, according to FBI data, which reduces the risk of theft claims for insurers.

The last billion-dollar disaster event that affected Utah was the Colorado hailstorm in 2018, NOAA data shows. The storm caused $2.2 billion of damage in total but only moderate hail damage in Utah.

7. Illinois

Average annual home insurance cost: $1,753

Home insurance cost compared to the U.S. average: 1% lower

Affordability Score: 88.1

Illinois home insurance is only 1% less expensive than the national average, but wage growth in the state surpassed insurance rate hikes in 2023. The small savings could be shortlived if Illinois continues to experience the type of severe weather it saw last year.

A record-breaking 58 tornadoes touched down in the Chicagoland area in 2023. In a first for the area’s recorded history, tornadoes touched down in January, February, and March. The typical tornado season in Illinois is in the spring or early summer.

8. Washington

Average annual home insurance cost: $1,201

Home insurance cost compared to the U.S. average: 32% lower

Affordability Score: 87.6

The cost of home insurance in Washington is nearly a third lower than the U.S. average, despite the state’s wildfire risks. The state’s consumer protection laws, which prohibit insurers from using a lack of credit history as a rate-setting factor, might influence rates. After June 1, 2024, new legislation mandates that all insurance companies operating in Washington must explain the reasons for rate increases to policyholders if the hike is 10% or more.[23] The law could dissuade companies from larger rate increases.

Washington homeowners in areas with a high wildfire risk currently face non-renewals or difficulty finding an insurer. The frequency and severity of wildfires are increasing due to climate change, according to the Washington Department of Ecology, putting the dream of homeownership in the state at risk.

9. West Virginia

Average annual home insurance cost: $1,403

Home insurance cost compared to the U.S. average: 21% lower

Affordability Score: 86.4

West Virginia wages grew faster than insurance costs in 2023, contributing to the state’s affordability ranking. Like many of the most affordable states for homeowners insurance, West Virginia is at relatively low risk of climate catastrophes.

The state has experienced low amounts of severe weather damage since 1980, according to the First Street Foundation’s Climate Abandonment Areas report. Most West Virginia counties have a “very low” FEMA risk rating, and a handful are rated “relatively low” risk.

10. Ohio

Average annual home insurance cost: $1,192

Home insurance cost compared to the U.S. average: 33% lower

Affordability Score: 85.2

Ohio had the least favorable ratio of wage growth to insurance rate hike of the 10 most affordable states, but residents still pay a third less than the national average for home insurance. Like West Virginia, Ohio has experienced low damage from climate hazards since 1980, according to the First Street Foundation.

FEMA’s National Risk Index ranks most Ohio counties as a “very low” or “relatively low” risk. Insurance is the sixth-largest industry in Ohio, so homeowners might also have more options when searching for a competitive rate.

Homeowners face unpredictable costs

Increasingly frequent and severe climate catastrophes present a less predictable financial risk for homeowners. Unable to pay for costly damages from wildfires, hurricanes, and hailstorms, insurance companies have stopped writing new policies in certain disaster-prone states.

“My home insurance doubled on renewal in March. We didn’t know about it until our mortgage payment went up because our equity account was audited and they found out it had a deficit. For now, we pay $300 more a month to try to recover the deficit, but we also shopped for new home insurance that saves us 50%.” —Jessica Edmondson, Director of Media Outreach at Insurify

Reinforcing roofs, installing storm shutters, and taking other steps to disaster-proof homes can help policyholders lower their premiums. However, some homeowners will have fewer options for coverage as insurers leave high-risk states. Buying a home in an area with fewer severe weather risks could save homeowners from exorbitant climate-related rate hikes for now.

But homeowners insurance prices in lower-risk states might not remain stable for an entire 30-year mortgage. “Since 1901, the average surface temperature across the contiguous 48 states has increased at an average rate of 0.17°F per decade,” reports the Environmental Protection Agency (EPA).

As climate change progresses, home insurance rates will likely continue rising to make up for the risk, threatening the American dream of homeownership.

Methodology

To determine the relative financial burden of homeowners insurance in relation to real estate costs and overall homeownership, the data science team at Insurify evaluated three factors in every state: the average yearly cost of a home insurance policy in 2023, how much home insurance prices changed between 2022 and 2023, and how that change compared to the state’s wage growth.

Insurify’s home insurance affordability score combines these three metrics into a proprietary algorithm, giving equal weight to each factor. The results are scaled such that the least affordable state has a score of 0 and the most affordable has a score of 100.

Insurify data scientists used the company’s internal database of real-time home insurance quotes from partner companies to see how home insurance prices changed in every state. To track yearly changes in home insurance prices, they compared the median quote for a policy with a dwelling coverage limit between $250,000 and $350,000 and a liability coverage limit of $100,000 in every state in 2022 against the median quoted price for a policy with the same coverage limits in 2023.

Home insurance prices come from Quadrant Information Services and represent the average yearly cost for a policy with $300,000 of dwelling coverage and $100,000 of liability coverage across 10 representative counties in each state.

Lastly, yearly wage growth in each state comes from the Bureau of Labor Statistics and represents the percent change in average weekly wages in every state between Q2 2022 and Q2 2023.

 

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