Skyrocketing Homeowners Insurance?

The news has recently been filled with people shocked by big price increases in their homeowner’s insurance. The largest increases have followed natural disasters in parts of Florida and California, but the price hikes have affected homeowners across the U.S.

Nearly half (47%) of homeowners said their insurance has experienced a premium increase in the past year, the highest rate of increases in more than a decade, according to the J.D. Power 2025 U.S. Home Insurance Study. Separately, data from ICE Mortgage Technology says that costs for homeowners insurance have risen 70% in the past five years.

More price hikes are coming. Home insurance premiums are expected to increase by an average of 8% in 2026 and nearly 30% over the next 30 years, according to LexisNexis Risk Solutions, in its recently released 10th annual U.S. Home Trends Report.

The trend has changed how some people plan for and pay for home insurance.

Location, location, location

The same rules that apply to real estate now also apply to home insurance. Today location may not only determine price, but availability.

Mitch Katz, financial planner and partner at Capital Associates in Bethesda, Maryland, says Covid led to people selling homes and seeking lower-cost alternatives in smaller communities, especially in Florida, Texas other states with no income tax. But some of those “savings” have been eaten up by rising costs for homeowners’ and car insurance. “It’s increased everywhere, but it’s really in the places that benefitted most (by Covid),” he says. “All of a sudden, you’re not necessarily saving money. And homeowners insurance is a large part of that cost.”

The skyrocketing rate increases have left some families looking for less costly alternatives and others unable to pay for insurance at all. There are options, but some will only work for high-income individuals.

Cancel your insurance?

Katz says he had to talk a client out of cancelling his homeowners insurance, telling him it was a bad idea. “You can’t necessarily not have homeowners insurance,” he says. I don’t want to say it’s rare, but it’s a specific use case. Almost all mortgages or banks, require you to have the insurance. You can’t just drop it. They mandate the insurance to protect themselves. So very few people have that.

“In the case that this particular client, the cost had gone up so much (it tripled in five years), they just said, we have limited dollars,” he says. “Maybe we’ll just get rid of it. They were looking at and trying to control some of the costs that they had not anticipated. But their homeowners association actually required them to have the insurance.”

Consider a higher deductible

Some financial planners say homeowners with a fully funded emergency fund can reduce premiums by taking on more risk.

Many homeowners have deductible that are two low relative to their finances and liquidity, some financial planners say. Higher deductibles shift more risk to the homeowner, but they could result in reduced premiums and cost savings. Homeowners should review deductibles regularly when they review their finances and renew their policies.

Put rising insurance costs in your financial plan

In your financial plan living expenses increase annually at the rate of inflation. Mortgage expenses are generally fixed. Homeowners insurance and taxes used to be in the plan at the rate of inflation, “But now, especially for my clients that live in states like Florida, California, we increase (insurance) projections at a much higher rate so that we know that we’re going to need more money for that expense later,” says Katz.

“Now we project that at a much higher rate than everything else because of what we’re experiencing,” he says.

Self-insure

This is not an option for most. And it may not even be an option for higher-income people who can afford to try it.

“People can self-insure outright, meaning that they don’t take insurance at all,” says Katherine Frattarola, executive vice president and Head of HUB Private Client at HUB International. “But in those cases, those folks don’t have a mortgage, because most lenders require you to have some amount of insurance.

“So, the way that those with a mortgage would think about self-insurance is, for example, with higher deductibles,” she says. “Sometimes, when the term self-insurance is thrown out there, people assume they don’t have any insurance at all. That is one way to look at it. But I still may have insurance, but I’m going to have a higher deductible. I’m going to have a $25,000 deductible versus a $5,000 deductible, which would mean that the first $25,000 of risk is on you as the homeowner.

“Or you may say, I am deciding that I’m going to get a policy without wind coverage, or I am not going to purchase flood insurance,” she says. “In those situations, it’s also a type of self-insurance, because what you’re saying is, in the event of a flood or in the event of wind damage, I, as the homeowner, am going to be responsible for that risk.”

Frattarola says she advises clients is based on their risk profile, their risk appetite or their lifestyle. “In some cases, it may be taking a higher deductible. In some cases, it may be, if you have a balance sheet that could sustain a total loss, and you have the stamina to marshal your own resources to get back on your feet in the in an event of a catastrophic loss, then we may advise you that you should fully self-insure.”

But, if you choose this option, make sure you have the time, patience and resources you need to manage rebuilding after a disaster, she says. “You’re going to have to marshal the folks who are responsible for excavation, remediation, etc.,” she says.  “The carriers have leverage because they insure thousands of homeowners and they have relationships with vendors.”

YOUR TURN

How has rising home insurance costs impacted you? How do you handle it? Let us know in the comments!

 

Rodney A. Brooks is an award-winning journalist and author. The former Deputy Managing Editor/Money at USA TODAY, his retirement columns appear in U.S. News & World Report and Senior Planet.com. He has also written for National Geographic, The Washington Post and USA TODAY and has testified before the U.S. Senate Special Committee on Aging. His book, “The Rise & Fall of the Freedman’s Bank, And Its Lasting Socio-economic Impact on Black America” was released in 2024. He is also author of the book “Fixing the Racial Wealth Gap.” His website is www.rodneyabrooks.com

 

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