The Future of Home Insurance in the U.S.

In this report: the current state of home insurance coverage in America, how we got to this point, and what the future might hold for homeowners.

Home insurance coverage in the U.S. has changed dramatically in recent years. In some parts of the country, traditional coverage is no longer an option.

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Nine Things to Know Right Up Front

1. Major insurers are withdrawing from high-risk states like California, Florida, and Texas, leaving hundreds of thousands of homeowners scrambling for coverage.
2. Premiums are rising dramatically across the country, with some homeowners seeing costs doubling in just a few years.
3. Climate change is the primary driver, increasing the frequency and severity of wildfires, hurricanes, floods, and other disasters.
4. State insurance programs designed as small safety nets are now covering well over a million properties and growing rapidly.
5. Property-level risk pricing is starting to replace geographic pooling, meaning your specific home’s characteristics could determine your rate.
6. Mitigation is becoming common, with insurers requiring or rewarding homeowners for taking certain protective measures.
7. Some areas may become uninsurable, potentially affecting property values and where Americans can afford to live in the future.
8. New insurance products are emerging, including parametric policies and modular coverage options that break from the traditional model.
9. The changes occurring in crisis states like California and Florida today show what might be coming to the rest of the country in the years ahead.

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What You’ll Find in the Rest of This Guide

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The Future of Home Insurance in the U.S.

Based on current trends and long-range predictions, the future of homeowners insurance in America will likely involve three major developments:

• Significantly higher costs and premiums for homeowners
• More granular pricing models based on individual property characteristics
• Mandatory mitigation measures to maintain coverage

Some high-risk areas may become uninsurable through private markets, pushing more homeowners into state-backed programs.

Federal Reserve Chair Jerome Powell recently told the Senate Banking Committee that “in 10 or 15 years, there are going to be regions of the country where you cannot get a mortgage” (because home insurance is hard to obtain).

Traditional geographic risk pooling models will largely disappear in some areas, replaced by property-specific risk assessment.

Climate change will continue to produce stronger and more frequent storm-based disasters, making insurance fundamentally more expensive.

Home values in high-risk areas will likely decline as insurance costs rise or coverage becomes unavailable, reducing demand from buyers.

We’re seeing some of these changes already, in California, Florida, and Texas. Over time, it could spread to other states, reshaping where Americans can afford to live.

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The Steady Unraveling of Traditional Models

For decades, homeowners insurance worked on a simple promise. You pay your premium every year, and if disaster strikes, your insurer helps you repair or rebuild.

This system gave millions of Americans the confidence to buy homes, knowing they had protection against the unexpected.

But now, that system is breaking down:

• Major insurance companies are pulling out of entire states.
• Premiums are doubling or tripling in some areas.
• Homeowners who have paid their insurance bills on time for years are receiving non-renewal notices in the mail.
• And in some high-risk areas, people simply cannot find coverage at any price.

What’s happening right now in states like California, Florida, and Texas is not just a regional problem. It’s an early warning sign for the entire country.

Like it or not, the way we insure our homes is changing fundamentally. And these changes will affect where Americans can afford to live, how much their homes are worth, and what it means to own property in the United States.

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Ground Zero: The State-by-State Breakdown

This report speaks to homeowners all across the United States. But in order to fully understand it, we have to look at where it began: in California, Florida, and Texas.

1. California’s Perfect Storm

California faces a home insurance crisis primarily driven by wildfires.

In recent years, the state has seen some of the most destructive fires in its history. The 2018 Camp Fire alone caused $12 billion in insured losses and destroyed nearly 19,000 structures.

Major insurers like State Farm and Allstate have stopped writing new policies in California. Some have even stopped renewing existing policies.

The companies say they cannot charge enough to cover their risk because California regulations limit how much insurers can raise rates and how they can use predictive models.

The result: hundreds of thousands of California homeowners have been pushed into the state’s FAIR Plan, a bare-bones insurance program that was intended to be a last resort.

As of fall 2025, the FAIR Plan’s total exposure had risen to $696 billion, and that number keeps growing. Many industry experts view this as unsustainable.

2. Florida’s Hurricane Reckoning

Florida’s insurance crisis has been building for years, but it reached a breaking point recently.

Since 2020, more than a dozen insurance companies have gone insolvent in Florida. Major national insurers have pulled back or left the Sunshine State entirely.

The state faces multiple challenges. Hurricanes are the obvious risk, but Florida also has high rates of insurance litigation and fraud, which drive up costs for everyone.

Some lawyers actively solicit homeowners to file claims, taking large cuts of any settlement. Roofing contractors go door-to-door after storms, offering “free” roof inspections that often lead to inflated or unnecessary claims.

Florida’s state-backed insurer, Citizens Property Insurance, has become one of the largest property insurers in the United States. At one point, they were covering more than 1.2 million policies.

This was never the plan. Citizens was meant to be a last resort. Instead, it has become the main option for hundreds of thousands of homeowners. (Noticing a pattern?)

Premium increases have been severe. Many Florida homeowners now pay $5,000 to $10,000 per year for insurance, and some pay even more. For people on fixed incomes or tight budgets, these costs are unsustainable.

3. Texas: Hail, Wind, and the Limits of Deregulation

Texas took a different approach than California. The state deregulated much of its insurance market, allowing companies to set their own rates and terms.

The idea was that competition would keep prices reasonable.

But Texas faces its own challenges. Severe hailstorms and windstorms cause billions in damage each year. The state’s coastal areas are vulnerable to hurricanes.

The result of deregulation has been mixed. Some homeowners pay less than they would under a regulated system. But others face massive rate increases with little recourse. Companies can raise rates significantly or drop coverage with relatively few restrictions.

In some parts of Texas, especially along the coast, insurance has become extremely expensive or difficult to find. The Texas FAIR Plan, once a small program, has grown substantially.

The Common Thread in These Scenarios

Despite their different approaches and specific challenges, California, Florida, and Texas have some of the same insurance-related challenges:

• Increasing disaster frequency and severity: All three states have seen more frequent and more destructive natural disasters in recent years.
• Rising reinsurance costs: Insurance companies buy their own insurance (called reinsurance) to protect against catastrophic losses. Reinsurance costs have increased dramatically worldwide, and insurers pass these costs on to homeowners.
• Outdated risk models: Traditional insurance models attempt to predict future losses based on historical data. But when the past can no longer predict the future, these models break down.
• Construction cost inflation: It costs significantly more to rebuild a home today than it did just a few years ago. Lumber, labor, and other construction costs have surged, increasing the amount insurers must pay for claims.
• Affordability vs. risk dilemma: Regulators want to keep insurance affordable, but insurers say they need higher rates to stay solvent. These conflicting agendas have caused many companies to simply leave rather than operate at unsustainable rates.

Emerging Trouble Spots Elsewhere in the U.S.

California, Florida, and Texas get the most attention when it comes to home insurance crises. But other states are beginning to experience their own challenges.

Other areas where home insurance costs could rise:

• Colorado: Challenges include growing wildfire risk and severe hailstorms that can cause widespread roof damage.
• Louisiana: The state continues to struggle with hurricane risk and multiple insurer insolvencies, reducing options for homeowners.
• Coastal regions throughout the country are experiencing increased flood risk and hurricane exposure that affects insurance costs.
• The Midwest: This region has seen more severe weather events, including tornadoes and damaging hail.

What happens in California, Florida, and Texas today may come to these states tomorrow—and even more states years from now.

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The Underlying Forces Reshaping Insurance

A perfect storm of overlapping factors brought us to this point. Here are some of the main reasons why home insurance is getting more expensive.

1. Climate Change as the Primary Disruptor

The most fundamental force changing homeowners insurance is climate change. This is not a political statement but a financial reality that insurers must accept.

Wildfires are larger and more destructive. Hurricane intensity has increased. Severe storms are more frequent. Flooding happens in areas that were not previously considered high-risk.

Insurance works when risks are predictable and spread across many policyholders.

But when disasters become more frequent and severe, the math changes. More people file claims, and those claims are larger.

Eventually, premiums must rise to match the new level of risk, or insurers will lose money.

2. Outdated Risk Models Meeting New Realities

Insurance companies often rely on historical data and complex models to predict future losses. If wildfires burned X number of homes over the past 30 years, the model might predict they will burn a similar number in the next 30 years.

But what happens when the past is no longer a reliable guide to the future?

What if wildfires now burn twice as many homes? What if hurricanes cause more damage because they intensify more rapidly or stall over populated areas?

Insurers are scrambling to update their models and trying to predict an uncertain future. This forces them to adjust, either charging more to cover unknown risks or exiting markets entirely.

3. Reinsurance Market: The Crisis Behind the Crisis

Reinsurance companies insure the home insurance companies. When a hurricane causes $20 billion in losses, primary insurers tap their reinsurance to help pay claims.

But the global reinsurance market has tightened significantly in recent years. Reinsurers have raised their prices and become pickier about the types of risks they will cover. Some have pulled back from certain U.S. markets entirely.

For primary insurers, this means they pay more for reinsurance and get less coverage. These costs get passed on to homeowners through higher premiums.

And when home insurance companies cannot get adequate reinsurance at any price, they’re forced to reduce their exposure by dropping policies or leaving markets.

4. Construction Costs and Inflation Compounding Exposure

The cost to rebuild a home has increased dramatically in recent years. Lumber prices spiked during the pandemic. Labor shortages have driven up wages. Supply chain issues have increased the cost of materials.

These higher costs mean larger payouts when insurers settle claims. A home that would have cost $300,000 to rebuild in 2019 might cost $400,000 or more today.

Insurers must charge premiums based on current replacement costs, not what the home cost when the policy was written. This leads to higher premiums for homeowners.

5. Litigation and Fraud in Specific Markets

In some states, particularly Florida, litigation and fraud play a major role in all of this.

Some attorneys and contractors have built business models around maximizing insurance payouts, often through aggressive or questionable practices.

Fraudulent claims, exaggerated damages, and unnecessary lawsuits drive up costs for insurers. These costs get passed on to all policyholders in the form of higher premiums. Insurers also become more cautious about writing policies in these states, to avoid expensive lawsuits.

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How the Insurance Industry Has Responded

Insurance companies have responded to these changes in a variety of ways, but mostly by (A) changing their pricing models and (B) withdrawing from high-risk markets.

Here are some of the ways they’re adjusting:

1. Risk-Based Pricing Revolution

Traditionally, insurance companies pooled risk across large geographic areas. If you lived in a lower-risk neighborhood, you partly subsidized your neighbor in a higher-risk area. This approach kept insurance affordable for people in risky locations.

That model is changing. Insurers are moving toward more granular, property-specific pricing.

New technology allows them to assess individual properties in great detail. They can see a variety of risk factors such as:

• How close a home is to brush that could fuel a wildfire
• Whether or not the roof is impact-resistant
• Where the nearest fire station is located
• What hat materials were used in construction

This means people in lower-risk properties might pay less for homeowners insurance, while those in higher-risk properties pay a lot more.

2. Policy Exclusions and Coverage Restrictions

To manage and reduce risk, many insurers are adding more exclusions and restrictions to their policies. For instance, they might exclude certain types of water damage, limit coverage for roof replacements, or require higher deductibles.

Some insurers now use separate deductibles for different types of losses. You might have a $1,000 deductible for a kitchen fire but a 5% deductible for hurricane damage. On a $400,000 home, that 5% deductible means you pay the first $20,000 of damage out of pocket.

These restrictions shift more of the financial risk to homeowners. Many people don’t even realize they have such exclusions and limitations until they file a claim.

3. Non-Renewal Strategies and Market Exits

When insurers decide a market is too risky or unprofitable, they have two main options: raise rates substantially or stop writing policies.

Many have chosen the latter. Non-renewals have become common in high-risk areas, especially in California and Florida.

Homeowners receive a letter stating their policy will not be renewed when it expires. This is not because they did anything wrong or filed too many claims. The insurer has simply decided to exit that market or reduce its exposure in that area.

Being non-renewed can create a cascade of problems:

• Other insurers may not want to pick up the policy, especially if a major company just dropped it.
• The homeowner may end up in a state program with limited coverage and high costs.
• And if they have a mortgage, they’re still legally required to maintain insurance, creating additional stress.

4. Technology: AI, Satellite Imagery, and Predictive Modeling

These days, insurance companies are investing heavily in technology to better evaluate and manage risk associated with homeowners policies.

Technology is fundamentally altering the home insurance industry:

• Satellite imagery can identify properties with wooden roofs or nearby vegetation.
• Drones can inspect properties without sending an adjuster.
• AI can analyze vast amounts of data to identify risk factors humans might miss.

These methods help insurers make informed decisions, but they also allow them to be more selective. A property that might have been insurable five years ago might be rejected today because satellite imagery shows it is too close to wildland brush.

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New Products and Programs for Homeowners

New home insurance products and programs have emerged in recent years, and we’ll likely see more of this going forward as well.

Here are some emerging options for homeowners in high-risk areas:

1. Parametric Insurance: Paying on Triggers, Not Losses

Traditional insurance pays based on actual losses. If your home suffers $100,000 in damage, the insurer assesses the damage and pays you $100,000 (minus your deductible).

Parametric insurance works differently. It pays a predetermined amount when a specific trigger occurs, such as wind speeds exceeding 130 mph or an earthquake of a certain magnitude. The payout does not depend on the actual amount of damage.

Parametric insurance often kicks in faster, as well. There’s no lengthy claims process or damage assessment. If the trigger occurs, you get paid quickly.

The disadvantage is that the payout might not match your actual losses or cover repairs.

Parametric insurance is still relatively new in the U.S., but it’s becoming increasingly common as a supplement to traditional homeowners coverage.

2. Usage-Based and Modular Coverage Options

Some new insurance products allow homeowners to customize and fine-tune their coverage.

Rather than buying a one-size-fits-all policy, you might buy a base dwelling policy and then add specific coverage for wind, flood, wildfire, or other perils as separate modules.

This approach gives homeowners more control over their costs:

• If you live in an area with low flood risk, you don’t pay for flood coverage.
• But if wildfire is your main concern, you can buy robust wildfire protection.

Usage-based insurance (long used in auto insurance), is also starting to appear for homeowners. Your premium might adjust based on how well you maintain your property, whether you have working smoke detectors, etc.

3. Insurtech Innovations: Peer-to-Peer, Blockchain, Etc.

Technology companies are trying to disrupt traditional insurance in several ways, and these efforts could create new options for homeowners.

Peer-to-peer insurance models connect small groups of people who pool their resources to cover each other’s losses. The idea is that people are more careful and honest when they are insuring their friends and neighbors.

Blockchain technology could make insurance transactions more transparent and efficient, reducing administrative costs and speeding up claims payments.

Instant underwriting uses AI and big data to provide insurance quotes immediately, sometimes within seconds. This could make insurance more accessible while reducing costs.

But it’s too early to know if these new models can scale effectively or compete with established insurers. Only time will tell.

4. Discounts for Mitigation Investments

Some insurers are creating policies that reward homeowners for making their properties more resilient.

For example, they might offer big discounts for:

• installing impact-resistant roofing
• creating defensible space around your home
• elevating utilities above potential flood levels
• using fire-resistant building materials

The discounts can be substantial (sometimes 20% or more), which helps to offset the cost of those improvements.

This approach can benefit homeowners and insurers alike, since both benefit when properties have increased protection against damage.

5. Community-Based and Micro-Insurance Strategies

Some organizations have begun to explore community-based insurance models, where neighborhoods or towns purchase collective coverage or create mutual-aid agreements.

These strategies might work for covering smaller, more frequent losses. But they would still need backing from larger insurers or reinsurers for catastrophic events.

Similarly, micro-insurance gives homeowners limited coverage for very low premiums. For people who cannot afford a traditional homeowners policy, this approach would at least provide some protection.

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The Growing Importance of Mitigation

The insurance industry has learned that simply paying for losses after disasters is no longer sustainable. They’re now shifting their focus toward preventing losses in the first place.

Mitigation: Actions taken by a homeowner to reduce the risk of damage to their property from natural disasters or other hazards.

Mitigation can make your home less likely to be damaged during a disaster, which reduces insurance claims and could lower your premiums.

In high-risk areas, homeowners might need mitigation just to get coverage at all.

Building Codes and Resilient Construction

Building codes are slowly evolving to address increased risks from natural disasters.

• New homes in wildfire-prone areas may be required to use fire-resistant materials.
• Homes in hurricane zones may need stronger roof attachments and impact-resistant windows. Flood-prone areas may require elevated construction to protect against floodwaters.

The challenge is that building codes are typically set by local governments (cities and towns) and vary widely in terms of standards and enforcement.

Additionally, codes typically apply only to new construction or major renovations. That means millions of existing homes don’t meet current resilience standards.

Strengthening and standardizing building codes could significantly reduce future losses. But it will require political will and coordination.

Wildfire Home Hardening and Defensible Space

In wildfire-prone areas, home hardening has become critical.

According to CAL FIRE, home hardening involves using vegetation management and specific building materials to “resist the intrusion of flames or embers projected by a wildland fire.”

Home hardening steps might include:

• Installing fire-resistant roofing and siding
• Sealing vents to prevent ember intrusion
• Using tempered glass windows
• Enclosing eaves to eliminate gaps where embers can enter
• Clearing vegetation around the home to create “defensible space”

When it comes to defensible space, the most critical zone is the first five feet from your home. In that zone, nothing flammable should exist. Beyond that, experts recommend thinning vegetation and maintaining healthy plants that are less likely to burn.

In wildfire-prone parts of the U.S., more and more home insurance providers are requiring homeowners to take hardening measures like these.

Flood Mitigation and Elevation Requirements

For flood risk, mitigation efforts can include:

• Elevating your home above expected flood levels
• Installing flood vents to allow water to flow through
• Using flood-resistant materials for walls and floors
• Improving drainage around your property

Some communities are going further, buying out homes in flood-prone areas and converting the land to open space. Certain federal agencies have begun to fund these efforts.

This approach (also known as a “managed retreat”) removes properties from harm’s way entirely but requires significant public funding and willing sellers.

Public-Private Partnerships for Community Resilience

Experts increasingly recognize that individual property mitigation isn’t always enough. Entire communities need to become more resilient.

This might involve:

• Creating firebreaks and fuel management zones around towns
• Improving water supply for firefighting
• Building or strengthening flood control infrastructure
• Hardening power lines to reduce wildfire ignition risk
• Creating emergency evacuation routes

These projects require cooperation between government agencies, utilities, insurance companies, and residents. Some insurers are now offering community-wide discounts when towns adopt comprehensive resilience programs.

Government Incentives and Requirements

Local government can encourage mitigation efforts in several ways. For example, they could offer tax credits, grants, or low-interest loans to help homeowners afford improvements.

Additionally, requirements for building permits, mortgage approval, or insurance eligibility can help ensure that mitigation actually happens.

Some states are beginning to adopt these approaches, but funding is limited and programs are often small-scale.

Expanding mitigation incentives could help millions of homeowners protect their properties, but would also require significant public investment.

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Conclusion and Summary

The future of homeowners insurance will require new thinking, new products, new approaches, and a shared understanding that things need to change.

There’s no easy button for this, and no single solution.

To protect the future of home insurance in the U.S., insurers, homeowners, and governments must work together to pursue overlapping solutions.