The increase in natural disasters isn’t just wreaking havoc on homes, but on homeowners insurance rates as well.
Nearly 50% of homeowners are concerned about extreme weather and the effect it has on their homes, a Fannie Mae study found. Heat and excessive wind are two of the factors homeowners are especially concerned about.
Geographic location plays a major factor in the type of weather homeowners are most concerned about. Extreme heat is the biggest concern in the West, while strong winds are the most concerning in the Northeast, Midwest and South. Other natural disasters are still worrisome, but less so than heat and wind. About 15% of homeowners are concerned about drought, 13% are worried about wildfires and 12% are concerned about flooding.
Homeowners fear damage to the construction of their homes due to the number of unprecedented weather catastrophes, but the hike in insurance premiums is also a major concern. Two-thirds of homeowners saw their rates go up in 2023 due to weather-related damage, Fannie Mae found.
One in four respondents to Fannie Mae’s study said these events had a "large" impact on their insurance premiums, signaling that rates skyrocketed in some states. Rates have risen so much for certain homeowners, that about one in ten weren’t sure they’d be able to afford their insurance premiums when it comes time to renew.
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Homeowners insurance rates have been steadily rising for just about every state in the country. Rates rose 11.3% nationally in 2023, according to S&P Global Market Intelligence. Certain states are worse off, seeing rates rise by over 50%.
Texas has faced the highest increase in rates. From 2018 to 2023, homeowners insurance rates rose 59.9%, Realtor.com reported.
Texas has faced a whole array of natural disasters in recent years, from hurricanes to flooding to excessive wind caused by dangerous thunderstorms. Climate change has exaggerated these storms and high inflation has made it more costly to rebuild, leaving insurance companies with no choice but to raise rates.
"We know the trajectory of climate risk," Benjamin Collier, a risk management and insurance professor at Temple University in Philadelphia said. "As we expect the risks to go up, the costs of insurance have to go up over the next couple of decades."
After Texas, Colorado residents have seen the second-highest insurance rate hike at 57.9%. Arizona also saw huge rate increases between 2018 and 2023. Residents of the state saw their rates increase by up to 52.9%. Rounding out the top five states with high insurance rate increases are Utah, with a rate change of 51.9% and Nebraska, with a rate change of 48.6%.
Comparing multiple insurance quotes can potentially save you hundreds of dollars per year on your homeowners insurance rates. It’s easy to get a free quote in minutes through Credible’s partners.
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Allstate pulled some of its homeowners insurance policies from California back in 2022, citing more frequent claims, largely due to an increase in natural disasters, mainly wildfires. The company said it had become too expensive to operate in the state.
Now, Allstate is considering returning to California, a local California news station reported. The company will only return if the department of insurance agrees to new rule changes.
"Once home insurance rates fully reflect the cost of providing protection to consumers, we’ll be able to offer home insurance policies to more Californians with timely rate approvals, the use of our advanced wildfire modeling and reinsurance costs," Allstate explained in a statement.
News of the potential return of Allstate is welcome for many homeowners as other insurers continue to pause policies throughout the state.
Three insurers, making up 40% of the coverage for California homes, have paused new policies or only offer certain plans. One of the three insurers, State Farm, announced it would not renew 72,000 policies for property owners in California.
Drivers looking to lower their home insurance rates can use Credible to compare homeowners insurance companies and shop plans in minutes.
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