Where home-insurance costs are rising the fastest in the U.S. - it's not California or Florida

By Aarthi Swaminathan

Insurers are hiking prices to match the increased risk of damage that homes face due to climate change and natural disasters, Insurify says

Homeowners across the nation are grappling with the rising cost of home insurance. But the sharpest hikes aren't being felt in the most disaster-prone markets, according to a new report.

The states with the sharpest increases in premiums relative to the national average aren't necessarily coastal, according to a report by Insurify, a Cambridge, Mass.-based insurance-comparison shopping website which looked at insurance quotes for typical single-family homes across the nation in 2023 and 2024.

The company expects a 6% average increase in the cost of homeowners insurance in 2024. The national average annual rate in 2023 was $2,377, and it's expected to rise to $2,522 this year. The figure does not include flood insurance or wildfire insurance, which are typically considered to be additional coverage.

In Louisiana, homeowners should brace themselves for a much bigger bill, with a projected increase of 23% in 2024, bringing the average annual rate to $7,809.

Homeowners in Maine will likely see the second-steepest increase in premiums in 2024, at 19%, to $1,571 on an annual basis. And in Michigan, Insurify projects a 14% increase to $2,095.

And the blows to homeowners' budgets will keep coming, Insurify warns: "Early weather forecasts predict a devastating hurricane season, which would cause further rate increases in 2025."

Here are the top five states where insurance costs are rising the fastest, according to Insurify's analysis:

   State      Average annual homeowners insurance rate in 2023  Projected annual insurance rate in 2024  Percentage change year-over-year 
   Louisiana  $6,354                                            $7,809                                   23% 
   Maine      $1,322                                            $1,571                                   19% 
   Michigan   $1,840                                            $2,095                                   14% 
   Utah       $1,369                                            $1,541                                   13% 
   Montana    $1,778                                            $1,997                                   12% 

To be sure, Florida homeowners are expected to pay the most for home insurance, with an average annual rate of $11,759 in 2024, which represents an increase of 7%. The Sunshine State was followed by Louisiana and Oklahoma, where homeowners pay the third-highest homeowners-insurance costs, at $5,711.

California homeowners are expected to see an 8% increase in premiums, to $1,921 in 2024.

Louisiana, Maine and Michigan homeowners are seeing the biggest hikes in insurance premiums because these are "areas where insurers have to catch up the most, in terms of getting prices to match the current climate risk," Chase Gardner, head of data research at Insurify, told MarketWatch in an interview.

In Louisiana, costs are rising as "companies that have raised their rates in the past six months have done so substantially," and are doing so to bring prices up to match the level of risk of damage that homes face in the state, Gardner explained.

Louisiana is seen as a higher-risk state due to its vulnerability to storms such as Hurricane Ida in 2021, which are becoming more frequent and destructive as a result of climate change. Storms have previously damaged properties in the state and increased reconstruction costs, which have resulted in increased expenses borne by insurers. Having adjusted their models, these companies are now passing those costs on to consumers.

And that's become too much for some homeowners to bear. Local outlet WDSU News recently told the story of one homeowner who sold her dream home in New Orleans due to soaring insurance costs.

The effects of climate change have also not spared states less commonly considered to be disaster-prone.

For instance, in Maine, rising sea levels are pushing up insurance costs due to "increased flood and associated risks, such as storms, or even flooding causing more trees to fall and land on homes, leading homeowners to file expensive claims for their homes," Gardner said. Because insurance companies have to pay out these claims, they're raising prices.

In Michigan, which saw the third-biggest increase in home-insurance premiums, the price hikes are fueled mostly by the rising cost to rebuild damaged property, Insurify said. According to Insurify's insurance experts, "it could just be that Michigan has just been underpriced over the past few years and insurers are catching up to the risk that they've been seeing," Gardner said.

Overall, home-insurance premiums are rising not only because of the increased frequency of natural disasters, but also as "construction costs are up everywhere since the coronavirus pandemic," Robert Dietz, chief economist at the National Association of Home Builders, told MarketWatch. Between 2020 and 2024, construction costs rose 38%, according to the NAHB's analysis of data from the Bureau of Labor Statistics, after climbing 10% from 2016 to 2020.

On the flip side, Insurify's report found that Washington residents will see the smallest increase in homeowners premiums in 2024, followed by Texas and South Dakota.

-Aarthi Swaminathan

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04-10-24 0604ET

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