The cost of homeowners insurance is projected to increase a further 6% this year, even as insurance rates are already soaring in some states.
This projection comes even after the cost of homeowners insurance has already risen around 20% over the past two years. A further 6% increase would place insurance rates at $2,522 at the end of the year. In comparison, insurance rates were only $1,984 in 2021.
In addition to a 6% projected increase this year, insurance costs are also forecasted to continue rising in 2025 amid early weather predictions of a devastating hurricane season, according to estimates from Insurify.
Much of the increase in the cost of homeowners insurance is attributed to climate change. In 2023 alone, 28 weather disasters across the United States caused at least $1 billion in damages, government data showed.
Where Do Homeowners Pay the Most for Insurance?
Of all states, homeowners in Florida pay the most for home insurance. In 2023, the average annual insurance rate in the state was $10,996. That is predicted to increase by 7% this year to $11,759. In comparison, the national average insurance rate was $2,377 as of 2023.
Apart from Florida's frequent catastrophic extreme weather events, other factors such as excessive litigation and widespread property fraud have led to soaring homeowners insurance premiums. The first factor in particular, which was made worse by climate change, has led some major insurers to withdraw from the state die to high damage claims.
Despite soaring costs, however, the vast majority of small insurers that replaced traditional insurers in Florida were "low quality" and had "less diversified."
This is according to a recent study conducted by researchers at Harvard University, Columbia University, and the Federal Reserve Board. The study was posted on a website for scholarly papers in December but has yet to be peer-reviewed.
"This report has said the vast majority of small insurance companies operating in Florida are really financially weak and so much so they wouldn't normally meet the federal guidelines saying you guys can back homes," Michael DeLong of the Consumer Federation of America said.
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