Many factors affect home insurance prices, including inflation and climate change. Home insurance prices rose 7% last year, according to Insurify’s proprietary data. Insurify data scientists expect prices to increase again in 2023 — this time by 9%.
In Insurify’s new report, Insuring the American Homeowner, you’ll learn more about trends in homeownership, why home insurance prices are increasing, and how you can save money on a homeowners policy. The report also covers topics such as climate change, home values, common homeowner concerns, and how to adapt to the changing real estate landscape.
Table of contents
Home insurance rates set to increase again in 2023
The average cost of homeowners insurance is set to increase by 9% in 2023, from $1,636 to $1,784, according to Insurify data.
As with auto insurance rates, inflation and increased material costs due to supply chain issues are driving home insurance increases. Homes, like cars, have become more expensive to repair, so insurance companies charge higher premiums to make up for that increased financial burden.
Home insurance price projections 2023
States with the most expensive home insurance rates
Florida, Oklahoma, and Louisiana are the most expensive states for home insurance. Florida homeowners pay an average premium of $7,788 a year, making it the country’s most expensive state for home insurance.
Cities with the most expensive home insurance rates
Hallandale Beach, Florida, sits atop the list of most expensive cities for home insurance, with an average annual rate of $12,578. Three other cities in Florida — Hialeah, Miami, and Lake Worth — follow closely behind, with average annual premiums of $12,319, $11,258, and $10,741, respectively. The following table shows the 10 cities with the highest annual homeowners insurance costs. It’s worth noting that all 10 cities are located in just three states that are historically at high risk from severe weather events like hurricanes and tornadoes.
| City | Average Annual Premium |
|---|---|
| Hallandale Beach, Florida | $12,578 |
| Hialeah, Florida | $12,319 |
| Miami, Florida | $11,258 |
| Lake Worth, Florida | $10,741 |
| Orange Beach, Alabama | $9,264 |
| Chauvin, Louisiana | $8,042 |
| Oklahoma City, Oklahoma | $7,546 |
| New Orleans, Louisiana | $7,518 |
| Newalla, Oklahoma | $7,268 |
| El Reno, Oklahoma | $7,226 |
Why home insurance rates are increasing
Home insurance rates are increasing for several reasons, including inflation, climate change, higher material costs, supply chain issues, and increased claims for fire and water damage. Different factors, like your credit score, ZIP code, and the coverage level you need, also affect how much you’ll pay for home insurance coverage.
Inflation is driving up repair prices
Inflation is one of the main reasons prices are increasing across the board and one of the biggest reasons behind home insurance increases as well. It’s partly due to supply chain issues and increases in consumer demand, and it’s significantly affecting the insurance market. Economists aren’t exactly sure when it will end, but some insurance experts weighed in on how it will affect insurance in 2023 for Insurify’s home insurance report.
Why are premium rates increasing?
Mark Friedlander
Director of Corporate Communications, Insurance Information Institute
“U.S. auto and homeowner insurance premium rates lagged behind the inflation rate in 2020 and 2021, laying the groundwork for the premium increases which occurred last year and will continue into 2023,”
“The same inflationary pressures that are driving up your grocery bill are now driving up your homeowner insurance rates,” says Colleen Finn, managing director of home product management at Plymouth Rock, a Boston-based insurer. “It is costing more and taking longer to repair your home, increasing the average cost per claim and ultimately the cost of homeowners insurance for everyone.”
Climate change is leading to more severe weather
Another key reason for home insurance increases is the rise in severe weather and natural disasters, such as floods, earthquakes, hurricanes, and wildfires. Homes in areas prone to natural disasters often see higher insurance rates than homes in low-risk locations.
The Federal Emergency Management Agency (FEMA) assigns a risk rating denoting the probability and severity of natural disasters across the United States. Homeowners located in areas of “very high” risk pay almost 2.5 times more for home insurance as those living in areas of “very low” risk, according to Insurify’s analysis of Quadrant homeowners insurance rates and FEMA’s assigned risk rating.
For every 1-point increase in a county’s FEMA risk index score (scaled 0–100), homeowners can expect to shell out an extra $24 in annual home insurance premiums.
Average insurance premium by FEMA risk rating
Many homeowners already feel that climate change has affected their homes’ values. Insurify surveyed 700 homeowners in key housing markets across the country, and 45% felt that climate change had already affected their homes’ values. Also, 76% felt a mild to high level of concern that climate change could eventually affect their homes’ values.
Finn notes that the increased frequency of natural disasters is also affecting the re-insurance market. “This is causing a hardening of the re-insurance market — which [insurers] purchase to protect policyholders in the event of a significant catastrophe — and driving up homeowners insurance premiums across the country, not just in catastrophe-prone areas,” says Finn.
Homeowners can get ahead of the impact of climate change on home insurance in several ways, like installing secure rooftop HVAC systems, reinforcing their roofs, and installing hurricane shutters. These steps will protect your home, and insurers may offer reduced rates to homeowners who take these risk-reduction measures.
Share of homeowners concerned over the impact of climate change on their home’s value
Supply chain delays
Higher material costs and supply chain issues are two other significant reasons for the expected homeowners insurance cost increases, according to insurer Plymouth Rock. These two issues go hand in hand, as scarcity of materials drives building costs up, making home repairs more expensive, which leads insurers to raise premiums to offset the costs.
Increased instances of fire damage
Many newer homes comprise different materials than older homes, such as pressed wood, which can lead to more instances of fire damage, according to Plymouth Rock. Furthermore, climate change and the increased risk of natural disasters lead to a greater risk of fire damage, causing insurers to implement higher rates.
“As we see a higher frequency of climate-related catastrophic events — wildfires, storms, floods, etc. — insurers will have no option but to price in the increased risk,” says Sam Eckhouse, principal at ClimateCheck. That means higher insurance premiums for homeowners, especially if they live in a high-risk area and haven’t taken steps to mitigate the risk of damage or loss.
If you plan on purchasing or building a home, consider the construction materials you’re using. Your home insurer may offer cheaper rates for homes built with less-flammable materials. You can also reduce rates by installing a sprinkler system and other safeguards to prevent extensive fire damage. Insurers often reward homeowners with lower rates when they take steps to minimize risk.
Increased instances of water damage
Many homeowners are placing appliances, such as washing machines, on the second floor of their homes, leading to increased water damage, according to Plymouth Rock. Other factors, such as coastal flooding and extreme weather, also lead to increased water damage, which insurers factor into policyholders’ premium costs.
However, flood insurance isn’t part of your home insurance policy. Flood insurance covers you from damage caused by floods and flood-related problems, such as storm floods, floods caused by a dam failure, and river overflows. Many private companies offer flood insurance, but FEMA offers affordable flood insurance if you can’t find one that suits your needs.
You can also take measures to reduce the likelihood of flood damage, such as waterproofing ground-level windows and doors, installing a sump pump, and raising your home’s foundation. Many insurers offer reduced rates to homeowners who take steps to minimize risk. Ask your insurer about any discounts or benefits for flood-related risk reduction.
How homeowners can save on home insurance
Homeowners can save on home insurance and adapt to changing environmental conditions in a variety of ways. The team at ClimateCheck offered some ways homeowners can prepare for the changing environment, including:
Develop and implement an emergency response plan
Install a secure rooftop HVAC system
Designate an emergency cooling/heating room with a backup energy generator
Stress test your HVAC systems for extreme temperatures
Waterproof ground-level windows and doors
Create “defensible space” around the home by clearing debris and dead trees
Install hurricane shutters
Reinforce your roof
Raise your home’s foundation
Waterproof your basement or crawl space
Use drought-resistant landscaping
Some other things you can do to save on home insurance include:
Bundle your home insurance policy with your car insurance policy
Compare quotes from multiple home insurance companies
Apply for additional discounts
It’s worth re-examining your homeowners insurance policy every year to ensure you’re adequately covered. Consider what happened during the year: Was there a time when you wished you had coverage for a specific type of property damage? Or maybe a time when you felt you narrowly missed having to pay an expensive bill due to a lack of coverage?
You may find that some of your coverage limits were too high or that you can now afford a higher deductible. Consider any add-ons that you may not need. Reassessing your home insurance policy each year is a great way to make sure you’re thoroughly protected and not overpaying.
Finally, Insurify’s experts recommend that you compare homeowners insurance quotes from other providers. It’s one of the best ways to find the cheapest homeowners insurance companies. You may be surprised that you can secure the same coverage for a lower premium with another insurer. However, Shawn Powers, Insurify’s vice president of insurance sales, cautions homeowners that prices across all insurers are increasing.
“The cost of individual policies is rising. Homeowners may notice an increase of hundreds of dollars from one year to the next,” Powers says. “While this may induce homeowners to shop with multiple companies for a policy, they may find their current carrier is not alone in raising rates.”
Different companies may offer better ways to reduce premiums, like a multi-policy discount or reduced rates for going claim-free. Certain regional insurers might offer more affordable rates than others for your location.
Get more insights on home insurance, homeownership, and real estate
Interested in learning more about home insurance trends in 2023? Want to know what other homeowners are concerned about? Download the full report listed below.
Insuring the American Homeowner
Insurance Writer
