How Natural Disasters Are Driving Up Home Insurance Rates

Rising costs of homeowners insurance worsened by extreme weather events

In recent years, natural disasters have become increasingly frequent and intense, causing significant damage to homes across the United States. These extreme weather events are not only wreaking havoc on properties but are also making it harder—and more expensive—for homeowners to obtain insurance coverage.

Rising premiums, skyrocketing repair costs, and even the inability to find insurance in high-risk areas are now common challenges for homeowners, especially in states like Florida.

Soaring insurance costs challenge homeowners

The cost of homeowner’s insurance has been steadily rising due to the increasing number of natural disasters, particularly hurricanes, floods, and other severe storms.

Further increases in insurance costs could jeopardize homeowners’ financial stability and potentially reduce home sales, exacerbating an already difficult period for the housing market.

According to the National Flood Insurance Program (NFIP), 90% of all natural disasters in the United States involve flooding. The program, which provides flood insurance to homeowners in high-risk flood zones, has struggled to keep up with the sheer volume of claims, and premiums have risen significantly as a result.

For homeowners in high-risk areas, costs like these are becoming unaffordable. In fact, according to data from Insurify, the average annual premium for homeowners’ insurance increased by nearly 20% between 2021 and 2023, and projects an additional 6% increase by the end of 2024.

One of the most alarming cases is Florida, where hurricanes like Hurricane Helene and Hurricane Milton have caused billions of dollars in damage. Florida residents are seeing their premiums rise at unprecedented rates.

In fact, the average annual premium in Florida is expected to be more than $11,700 by the end of the year—more than five times the national average. Similarly, Louisiana faces increasing challenges as the state will see the greatest increase to home insurance in 2024, with a projected skyrocketing hike of 23%, bringing the average annual rate to over $7,800.

Is the U.S. insurance system failing homeowners?

As the cost of homeowner’s insurance continues to rise, many experts are questioning whether the U.S. insurance system is falling short to protect homeowners.

Homeowners in high-risk areas like Florida often find it impossible to secure affordable coverage, or in some cases, any coverage at all. Insurers are increasingly pulling out of high-risk markets, leaving homeowners with fewer options and higher costs.

In May, State Farm, California’s largest home insurer, announced it would halt issuing new policies in the state due to wildfire risks. Similarly, Farmers Insurance decided that insuring homes in Florida was too risky and completely withdrew from the market.

Many private insurance companies have stopped offering coverage in areas most vulnerable to hurricanes, forcing homeowners to rely on state-run insurers as a last resort, which often come with higher premiums and limited coverage.

Countless Florida residents have been forced to secure insurance by companies such as Citizens Property Insurance Corporation, the state-backed insurer, despite its higher costs and more restrictive policies.

Impact on storm-proofing materials

The cost of storm-proofing materials, such as lumber, hurricane shutters, impact-resistant windows, and reinforced roofing, has also been affected by the increase in major storms.

As demand for these materials rises, so do their prices.

While storm-proofing your home can significantly reduce the risk of damage, it is becoming more expensive to do so. As a homeowner, consider storm-proofing as a long-term investment, but be prepared for higher upfront costs.

What homeowner’s insurance covers (and what it doesn’t)

Standard homeowners insurance policies typically cover the costs to repair, replace, or rebuild homes damaged by natural disasters such as storms, but coverage details vary.

Typically Covered

• Damage from wind, hail, and lightning
• Damage from fire and smoke
• Water damage from storms (if it originates from above)
• Costs to repair or rebuild the structure of the home
• Personal property damaged by a covered event
• Additional living expenses if you need temporary housing during repairs

Not Usually Covered

• Flood damage (requires a separate flood insurance policy, such as through the NFIP)
• Earthquake damage (unless you purchased an earthquake endorsement)
• Mold and rot that occur from long-term water exposure
• Costs for preventive storm-proofing materials (unless your policy includes specific endorsements)

Your homeowners policy won’t provide funds upfront for weatherproofing or fortifying your home. You’ll need to pay for any weatherproofing materials out-of-pocket.

Although your home insurance company won’t cover the cost of weatherproofing upfront, you may qualify for discounts or other incentives by installing certain upgrades. The FORTIFIED construction and re-roofing program, run by the Insurance Institute for Business and Home Safety (IBHS), provides a list of available incentives in certain states, such as insurance discounts and tax credits, for making home improvements.

Preparing for natural disasters

The best way to protect your home from severe storms is to be proactive. Here are some tips for homeowners:

• Review your homeowners insurance policy: Ensure your coverage is adequate for your area’s risks, including hurricanes, floods, or windstorms.
• Invest in storm-proofing materials: Consider upgrading your home with storm-resistant features, like hurricane shutters or impact-resistant windows.
• Create an emergency plan: Have a plan in place for your family in the event of a storm, including evacuation routes and supplies.
• File claims promptly: After a storm, contact your insurance company as soon as possible to begin the claims process.

What to do after a major storm

If your home has been damaged by a storm, it’s essential to follow these steps to ensure a smooth insurance claim process:

1. Contact your insurance company: Notify your insurer as soon as possible to initiate your claim.
2. Document the damage: Take photos and videos of the damage to your home and personal property.
3. Make temporary repairs: If necessary, make temporary repairs to prevent further damage, but keep receipts for any materials purchased.
4. File your claim: Work with your insurance company to file a claim. Provide documentation and estimates for repairs or replacements.
5. Work with an adjuster: Your insurance company will send an adjuster to assess the damage. Make sure to provide them with all relevant information.

Government funds for nonprofits providing critical infrastructure and essential services

In some cases, government funding is available to help homeowners recover from severe storms. Nonprofits that provide critical infrastructure and essential services in affected communities may be eligible for federal assistance.

Programs like the Federal Emergency Management Agency’s Public Assistance Program provide funds for repairs and reconstruction of public infrastructure, and in some cases, grants for eligible homeowners through community-based organizations.

Grants and loans may also be available through FEMA and the Small Business Administration (SBA) for homeowners who need assistance beyond what their insurance covers.

The bottom line

Severe storms are making it more difficult—and more expensive—for homeowners to secure and maintain insurance coverage.

The rising costs of home insurance is creating financial strain on homeowners, particularly in high-risk areas. While the U.S. insurance system is facing clear challenges, you can take steps to protect your home by investing in storm-proofing, reviewing your policy, and understanding the claims process.

By being proactive, you can better manage the risks posed by severe weather and ensure that your home and finances are safe prior to the storm’s arrival.