Home insurance now less affordable

"Affordability is becoming an issue in a great number of parts of the country. Some parts have difficulty even getting insurance."

Bill Gatewood, national personal insurance practice leader at Burns & Wilcox

Even those who can afford to buy a home these days must ask themselves if they can afford to insure it.

Nearly 30% of American homeowners are nervous about rising home insurance rates, according to insurance comparison site Insurify.

Home insurance prices jumped 19% – on average, $273 per policy – last year, according to a study by Guaranteed Rate Insurance. The insurer said prices surged 55% from an average of $1,108 in 2019 to $1,723 in 2023. And more increases may be on their way. Insurify forecasts some increases this year as high as 23% in states with severe weather.

"Affordability is becoming an issue in a great number of parts of the country," said Bill Gatewood, national personal insurance practice leader at insurance broker Burns & Wilcox. "Some parts have difficulty even getting insurance."

One reason for the soaring insurance rates is inflation. The cost of everything related to homebuilding and repairs – materials, parts and labor – has risen. The other main reason is the increased frequency and intensity of weather-related events.

For example, 2023 saw record-high summer temperatures and 28 separate weather and climate disasters costing at least $1billion each – the highest number of billion-dollar disasters in a calendar year. Before that, 2022 was a record year for tornados, the National Weather Service said.

States with highest costs

States with the highest home insurance costs are prone to severe weather events. Arkansas, Florida, Louisiana, Mississippi and Texas are vulnerable to hurricanes. Colorado, Nebraska and Texas face growing wildfire risk. And Kansas, Nebraska and Texas, are highly vulnerable to tornadoes.

The three most expensive states, according to Insurify, are:

Florida, with a $10,996 annual average expected to rise by 7% to $11,759 this year.

Louisiana, with a $6,354 annual average expected to rise by 23% to $7,809 this year – the largest predicted increase among states.

Oklahoma, with a $5,444 annual average expected to rise by 5% to $5,711 this year.

Even in these high-cost states, however, home insurance is "very street specific," said Paul Gallagher, senior vice president at insurance broker NFP, an Aon company.

"When you get an address for a house you're looking at and considering putting an offer in, put in some research before getting the mortgage application," he said.

Talk to your insurance agent to check the home's flood, wildfire or earthquake risks. Your insurance agent can determine if the home is insurable, if you'll have to go to a state insurer, and how high the premiums may be.

Ask for options, create a plan

Ask your insurance agent for options and loop in your financial adviser to create a plan to pay for it, insurance experts suggest.

For example, you're in Florida and annual insurance costs $25,000, with $20,000 of that expense for wind exposure. If the home has new shutters and a new roof, you might consider setting aside some your own money to pay for potential damage and save $20,000 in a given year.

"It's very risky, but more people are doing it," Gallagher said. "It's usually a very high deductible for wind anyway, so damage has to be significant" before insurance applies.

Your financial adviser can look at your assets and cash flow and help you decide "what to do in that case, or suggest taking the savings and put it into an account and invest it" so there's money there to pay for any potential damage, he said.

Reduce policy prices

Bundle: Consider using one insurer for auto, home and possibly, even life, because companies often offer discounts for more than one policy.

Update your house: "This is more important now than it used to be," said Paul Gallagher, senior vice president at insurance broker NFP. "The age of the roof, water heater, furnace, electrical and plumbing – if they're old, they could disqualify you for insurance from certain insurance companies."

Clean up or fortify your house: If you live in an area prone to wildfires, don't allow tree limbs to hang over the house or flammable mulch to accumulate. If you live in an area with hurricanes, install shutters.

Shop around: "Homeowners often lock in a rate and insurance company and don't shop around," said Michael Maerten, chairman of the board of Tri-County Suburban REALTOR, a local realtor association. "They should get a comparison rate every year."

Take a higher deductible: Higher deductibles will lower your premiums. Guaranteed Rate said in its study that the share of Americans taking deductibles between $5,000 to $10,000 jumped 49% between 2019 and 2023 compared with slight declines for those taking $500 to $2,500 deductibles. If you have wind or hurricane coverage, consider a percentage deductible, which calculates your deductible based on a percentage of the value of your home.

"Affordability is becoming an issue in a great number of parts of the country. Some parts have difficulty even getting insurance."

Bill Gatewood, national personal insurance practice leader at Burns & Wilcox