Several converging factors in 2024 create a challenging market for consumers looking for home insurance coverage.
Insurance companies are taking a close look at their books of business as weather has changed in severity, frequency and geography.
Historically, the threat of hurricanes was the biggest weather concern from a carrier perspective, limiting risk mostly to coastal areas. Over the past 5 years, however, the U.S. has experienced an increase in frequency and severity of wildfire activity as well as convective storm activity — including tornadoes, severe thunderstorms, hail and strong straight-line wind activity.
As a result, insurers are looking to reduce their concentration of exposure in any specific geographic areas, which is leading some homeowners to receive non-renewal notices while other others face steep premium hikes.
This phenomenon is exacerbated by recent increases in property values and rising costs of materials and labor, which are driving up payout amounts and making homeowners’ insurance less profitable for insurers.
We are seeing insurers significantly raise premiums or exit certain markets altogether. The fact that average home values have largely remained stable over the past two years should offer some respite from future large increases in premiums, but the major driver of future premiums will be the frequency and severity of future weather events. If more homes are damaged by natural disasters each year, and those homes are more costly to repair or replace, premiums will almost certainly continue to rise.
The average annual home insurance rate increased by 19.8% between 2021 and 2023, from $1,984 to $2,377, according to Insurify. The firm projects a 6% increase in 2024, placing rates at $2,522 by the end of the year.
Early weather forecasts predict a devastating hurricane season, which would cause further rate increases in 2025, Insurify says.
Insurance requirements
Homeowners’ insurance is not legally mandated in any U.S. state or territory. But is almost always required to carry a mortgage on a property in order to have a minimum level of coverage to replace the property against which the mortgage is held, says Ezra Peterson, senior director of insurance for Way.com.
If the property owner does not carry their coverage, the mortgage company will add their policy to the loan, a process referred to as ‘force-placed insurance. This policy will do little to protect the homeowner from any losses, as its purpose is to protect the mortgage bank’s interest in the property and typically contains very scaled don coverages.
If a property is owned outright, the homeowner can choose to self-insure, essentially accepting that any damage and liability arising from any cause will be their burden instead of purchasing an insurance policy on the open market.
While risky, this is becoming increasingly common, as the combination of a constant stream of natural disasters and rapidly rising rebuild costs for homes has led to skyrocketing insurance premiums. Based on 2021 data, 7% of U.S. homes are currently uninsured, with all industry metrics pointing to that number increasing since that study was released.”
Some states offer Fair Access to Insurance Requirements (FAIR) plans that provide minimum amounts of coverage when private insurers will not, Idziak says. For example, California’s FAIR Plan provides basic fire insurance coverage when private insurers won’t.
However, even last-resort insurance options are feeling the pinch.
In Florida, hurricane risk has made finding private homeowners insurance so difficult that the state-run Citizens Property Insurance Corp., which is supposed to be the insurer of last resort, is now the largest insurer in the state,” notes Cassie Sheets, a data journalist at Insurify. “We’re also seeing insurers non-renew policies in California, specifically in areas with a high risk of wildfires.”
What can homeowners do?
Homeowners have some options to secure home insurance in today’s challenging market.
Choosing a higher deductible and exploring coverage options like actual cash value insurance can help, as can developing a favorable risk profile by fixing smaller losses without filing an insurance claim, says McMurtie. He added that it’s important for home buyers to consider both the cost of the home as well as the cost of insuring the home and having conversations with an insurance advisor before signing on the dotted line. Things like the size of a home, the age of a home and where the home is located are all factors that can impact insurance.
Homeowners also can take action to lower their risk profile to make their homes a more attractive risk for insurers. These updates might include:
- Flow-based leak detection systems with automatic shut-off valves to prevent water damage;
- Whole-house generators that ensure homes remain powered during outages; or
- Low-temperature sensors that can alert homeowners of freezing pipes and home security systems to deter burglars.
Diane Delaney, executive director of the Private Risk Management Association (PRMA), adds that fire suppression systems, ember-resistant vents and gutter guards, and clearing brush and mulch can reduce potential damage and loss due to wildfires. In coastal areas, storm shutters and flood venting can reduce the risk of damage during hurricanes.
“Implementing measures to fortify properties against natural disasters strengthens homes and increases their attractiveness to insurance providers,” Delaney says. “It’s so important for clients to be a participant in their own insurance program by looking at deductibles and risk sharing structures to help manage costs and ensure the sustainability of insurance programs. Embracing these proactive steps can help homeowners retain or obtain coverage, ensuring protection and peace of mind.”
