Climate Change and Home Insurance Costs in the US

American homeowners have faced years of rising insurance costs, due in part to threats from climate change. But 2025 was a relatively quiet year for extreme weather disasters: wildfires and flooding devastated parts of California, Texas and Alaska, but no hurricanes made landfall in the continental U.S. So, will homeowners get a break on their insurance bills?

The answer is maybe — and only in some places.

Florida is one of those spots. The state has some of the country's highest insurance costs, and in recent years, a lot of homeowners had to rely on the state's insurer of last resort, known as Citizens Property Insurance Corp., because private carriers left Florida or went bankrupt after major storms. But private insurers have been returning to Florida, and most homeowners who are still covered by a state-backed plan will see their premiums go down this spring, Gov. Ron DeSantis, a Republican, said earlier this year.

Nationwide, however, industry forecasts show premiums rising between 3% and 8%, according to Bankrate. The steepest hikes are expected in Midwestern states that have suffered hail and tornado damage from big convective storms, says Mark Friedlander, a spokesperson for the Insurance Information Institute, an industry research group.

While disaster costs fell in the U.S. last year, it marked the fourth time in five years that extreme weather has inflicted more than $100 billion in annual losses. Given the mounting financial toll, a lot of home insurers probably won't rush to cut rates based on what happened in a single year, especially since the risk of more-intense storms, floods and wildfires is growing as temperatures rise, says Jacob Gellman, an assistant professor of applied economics at Oregon State University.

"We're talking about a 'better' than typical year in recent times," says Rob Hoyt, an insurance expert at the University of Georgia. "But that should be interpreted as amongst a very troubling set of years from a catastrophic loss perspective."

The average cost of homeowners insurance in the U.S. is about $2,400 annually, according to Bankrate. In 2020, the most common type of home insurance policy cost about $1,300 a year on average, according to American Express. The increase is straining household budgets. About 14% of owner-occupied homes are uninsured nationwide, said LendingTree, which runs an online marketplace for loans, in a recent report. The number jumped more than 6% from 2023 to 2024 as rising insurance costs accounted for a greater share of household income, the company said. In addition to raising prices, insurers have pulled back from offering policies in some of the riskiest areas.

The cost increases are being driven by several factors. Home insurers, which are overseen by state regulators, have been raising rates partly because climate-fueled disasters damage and destroy property. Additionally, people have continued to move to coastal regions vulnerable to hurricanes and to forested areas prone to wildfires. That means more property is in harm's way. Then, when homes burn or flood, inflation has made it more expensive to rebuild.

On top of those pressures, insurers have contended with rising costs for reinsurance — insurance for insurance companies. Recently, though, reinsurance prices have been falling, according to the ratings firm Moody's. While reinsurers suffered heavy losses from the California wildfires in 2025, Moody's said they got a financial boost when hurricane season ended last year without any hits to the U.S.

For homeowners, any potential benefits — like insurers passing along savings on reinsurance or expanding coverage in risky areas — will be felt most in hurricane-prone states, where insurers tend to spend more on reinsurance to guard against ruinous losses, says Jasper Cooper, a vice president at Moody's.

"Florida, for example, is the kind of place where I think it's reasonable to think that reinsurance terms may actually have a really big effect on the prices that homeowners pay to primary insurers," says Judson Boomhower, an associate professor of economics at the University of California, San Diego.

Homeowners in Louisiana and Texas could also benefit, according to insurance experts.

In Florida, DeSantis said the drop in insurance rates was also the result of efforts to limit insurance litigation.

With a couple more years of relatively low disaster costs, more parts of the country would see insurance rates "stabilize and probably start heading down," says David Marlett, managing director of the Brantley Risk & Insurance Center at Appalachian State University. "It's a highly competitive market," he says, adding that insurers would look to "increase their market [share] by lowering premiums."

For now, any relief homeowners get in the form of rate cuts or slower price increases is likely to be muted by the steep run-up in insurance costs in recent years, says Hoyt of the University of Georgia. In the five costliest states — Nebraska, Louisiana, Florida, Oklahoma and Kansas — homeowners pay upwards of $4,400 a year on average for insurance, according to Bankrate. That's more than $2,000 above the national average.

"What consumers are seeing and what buyers of reinsurance are seeing is, yeah, this is a bit of an easing," Hoyt says. "But it's at a very high level after several years of significant increase."

To bring down insurance prices long term, Hoyt says people need to reconsider where they live and how they protect their property against threats. Some of those changes are already happening, he says, as high costs for insurance and construction make parts of the country unaffordable for many homeowners.

"At the end of the day, if it can be afforded by someone and they're absorbing the cost, then I think, by and large, the U.S. view would be, then they can build," Hoyt says. "But, we have to make some tough decisions about repetitive-loss properties that are being rebuilt through government programs."