Home insurance will play a more significant role in housing affordability in 2025
Homeowners have historically paid roughly the same amount for housing each month, with slight increases in property tax and insurance year over year. But dramatic hikes in home insurance premiums, by almost 20% between 2021 and 2023, have made housing costs less predictable. Insurify projects a further 6% rise in home insurance costs by the end of 2024.
Increasingly severe and frequent climate catastrophes have fueled rate hikes, especially in states like Florida, where frequent hurricanes and tropical storms have threatened insurer solvency. Now, climate change is affecting weather patterns across the country, with rising temperatures leading to more extreme weather events, like heavy rainstorms and flooding.[3]
“Even states that are typically considered [lower risk] like Utah and Montana are seeing rate increases above 10% on average,” said Mallory Mooney, a licensed insurance agent and director of sales and service at Insurify.
As climate-related damage increases, insurers may require more frequent roof replacement to qualify for coverage or begin restricting windstorm coverage on HO-3 policies, as is already common for coastal properties. Insurers already restrict wildfire coverage in high-risk areas like California, but homeowners could see this practice spread as wildfires encroach on other states.
Homeowners will likely need to cover a higher share of replacement and rebuilding costs as coverage restrictions become more common.
Insurers will continue to raise home insurance rates to match increased climate risk levels and higher building costs, but homeowners can take a proactive role in lowering their housing costs. Every insurance company weighs risk factors differently, so comparing home insurance quotes from multiple insurers can help homeowners save money on coverage in 2025.
Methodology
Insurify’s data scientists analyzed housing cost increases, cost of living, crime rates, and unemployment rates to determine desirable cities that became unaffordable for median-income homebuyers between 2021 and 2024.
Our data scientists also factored in unemployment rates, increases in home values, cost of living, crime rates, and population growth to identify the five best cities for homebuyers making a median income of $80,610, as per the most recent U.S. Census Bureau data on real median salary for Americans.
For each metropolitan area in the U.S., Insurify calculated how much the median homeowner would spend on monthly housing costs, including mortgage payments, home insurance, and property taxes. The data science team based 2021 housing costs on a 2.96% 30-year fixed mortgage rate, 2024 housing costs on a 6.84% rate, and 2025 housing costs on a projected 6.3% rate. Insurify included a 20% down payment to eliminate the variable of private mortgage insurance (PMI).
By the “30% rule,” which advises that a financially responsible person should not spend more than 30% of their gross income on housing, a household earning $80,610 per year should spend at most $24,183, or $2,015.25 monthly, on housing. Thus, Insurify only considered metro areas with average monthly housing costs below $2,015.25 in 2024 for this study.
The U.S. Census Bureau reported a real median household income of $70,784 for 2021. Insurify only considered metro areas with average monthly housing costs below $1,769.60 in 2021.
The Insurify team removed cities with an above-average crime rate (measured by an overall index combining major violent and property crimes) from the suggested cities for 2025. Data analysts then ranked the suggested cities on a desirability metric, which rewards a low cost of living (excluding housing costs), low unemployment rate, and low crime rate. Insurify removed cities that had negative population growth. For ranked cities less than 100 miles apart, only the top city was included in the ranking to provide the most comprehensive list.
Average home insurance costs come from Insurify’s proprietary data of real-time insurance quotes and from Quadrant Information Services. Median home value, median property tax, and population data are from the U.S. Census Bureau. Cost of living data are from the U.S. Bureau of Economic Analysis, and unemployment rates are from the U.S. Bureau of Labor Statistics. Crime rates are from the Federal Bureau of Investigation.
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