Growing Climate Risks Cause Insurance Spikes Across the US

Home prices, job opportunities, and property taxes often dictate where homebuyers choose to live, but now homebuyers are also taking insurance costs into consideration. In states, such as Florida or California, where climate risks have grown more severe, annual insurance costs have skyrocketed, and more states are starting to see insurance costs take off as well.

According to a recent report from housing market platform Realtor.com, more than one quarter of all homes in the U.S. face at least one severe or extreme climate risk, whether that’s from fire, flood, or hurricane-force winds.

Flood risk in particular is growing across the U.S.

Climate risk is growing across the U.S., but that is especially true of flood risk. Nearly 6 million homes, valued at $3.4 trillion, face a severe or extreme risk of flood damage over the next 30 years, according to the report.

That threat is also growing in markets many homeowners may not expect. In New York, for instance, an estimated $95.3 billion worth of real estate is at risk of flooding not captured by FEMA’s boundaries. In Los Angeles, that gap totals $65.6 billion; and in San Francisco, it's $54.9 billion.

In which metros is homeowners insurance the most expensive?

In Miami, insurance costs are rising rapidly. The estimated average premium for a single-family home in the Miami metro now tops $22,700 a year, which is 3.7% of the median $614,000 home value. Miami is one of five major metros where insurance premiums now exceed 2% of a home’s value. The other four markets include New Orleans, Cape Coral, Fla., Baton Rouge, La., and Oklahoma City.

With rising risks in the South and West, homebuyers are looking inland. Still, there are risks

With coastal markets showing strong risk for wildfires, floods, and hurricanes, many homebuyers are moving toward the Midwest or the interior South, both of which offer relatively lower home prices as well.

However, climate risk is becoming more prevalent in these regions as well, and insurance companies are taking notice. In Illinois, for example, nationwide insurance agency State Farm is projected to raise home insurance rates by almost 30%.

Home insurance has been rising over the past few years as natural disaster risk grows

• Home Insurance Costs Surge: From 2020 to 2023, home insurance costs nationwide grew by 33%
• Home Insurance Premiums Rise While Median Income Lags Behind: Insurance premiums have grown by nearly 40% since 2019, but median incomes have only grown by 22% during the same period.