May 31, 2023 Breaking News, Latest News, and Videos

The States Where Homeowners Insurance Rates Are Rising the Fastest

The cost of homeowners insurance is rising everywhere. The insurance industry in general is distributing more payouts, thanks to factors like the COVID-19 pandemic, more frequent climate disasters, and ongoing supply chain and inflation issues — and the cost of these payouts is passed along to policyholders in the form of higher premiums.

Natural disasters, in particular, are becoming a cause of larger and larger payouts — events such as wildfired, floods, earthquakes and more cause billions of dollars in damage every year, and that number has been going up steadily.

Given these circumstances, you might think that California homeowners insurance rates are skyrocketing — and yet California hasn’t even cracked the top ten states in terms of rising homeowners insurance.

Some Numbers

First, let’s take a look a few relevant statistics:

  • The average annual premium for homeowners insurance in the US is $2,777 a year. This is only an average, however; premiums vary by state, and tend to be higher where there are frequent extreme weather events.
  • Also, homeowners insurance rates are outpacing inflation. From May 2021 to May 2022, the average homeowners insurance premium rose by 12.1%.
  • The average cost of a homeowners insurance property damage claim in 2022 was $13, 962, and homeowners will typically pay an average of $168 more for their insurance after making a claim.
  • 34% of property damage claims are due to wind and hail.

Natural Disasters on the Rise

Climate disasters and extreme weather events are at the center of a huge amount of insurance claims, and it’s only likely to get worse. In 2007, the Insurance Information Institute reported 500 natural catastrophes worldwide. In 2017, it was 740. In 2018 it was 850. In 2021, the losses from natural disasters exceeded $130 billion, a figure 76% higher than the 21st century average, and 18% higher than the year before.

The trend toward more costly and catastrophic extreme weather events, coupled with the already-present risk of said disasters, is increasing risk factors for insurance companies everywhere. This is particularly true in California, where climate change has dramatically increased the likelihood of a megaflood hitting the state.

Where Homeowners Insurance Rates Are Rising The Fastest

So where are homeowners insurance premiums rising the most rapidly? Again, surprisingly, not California.

California’s home insurance rates have not only remained fairly steady compared to much of the rest of the nation, but remains lower than the national average — according to Kristine Lee at the Zebra, California homeowners pay $1,031 per year or $86 per month in premiums, which is 35% below the national average.

There is, however, a caveat to this relatively low premium. Standard homeowners insurance in California doesn’t cover earthquakes. Homeowners must purchase separate earthquake insurance, which can range anywhere from $511 to $857 a year, depending on which company you purchase your policy from. While fires are covered — thus accounting for possible damage from wildfires — flood damage is also not covered by standard homeowners policies, and additional flood coverage could cost you about $995 a year. So while base homeowners insurance in California remains below the national average, you may end up paying as much or more than in other states.

So how do the other states rank up? Surprisingly, the most expensive state when it comes to homeowners insurance is Oklahoma, where homeowners pay $5,317 a year in premiums. (The average rate nationwide, for reference, is $2,777 a year.) Hawaii comes in the cheapest, at only $582 a year in premiums.

As for the fastest-rising home insurance premiums among states, here’s the top 10, according to CNBC:

  1. Arkansas: 18.5%
  2. Washington: 18.1%
  3. Colorado: 17.5%
  4. Texas: 16.0%
  5. Oregon: 15.4%
  6. Arizona: 14.8%
  7. Utah: 14.1%
  8. Minnesota: 13.9%
  9. North Carolina: 13.7%
  10. Illinois: 13.6%

Why do these other states rank higher when it comes to paying for home insurance? A lot of it comes down to the frequency of natural disasters. For example, Oklahoma has suffered 192 natural disasters since 1955, putting it in second place for most natural disasters. California, ironically, is number one at 313.

It’s the states in “Tornado Alley” which have tended to suffer the most — Colorado, Kansas, and Nebraska, where natural disasters have spiked steeply. In March of 2022, the US saw a record number of tornadoes at 233. Overall, tornadoes, hurricanes, and flash floods caused the most damage nationwide, and the top-ranked states all tend to be prone to those kinds of disasters.

So what should California homeowners do? With rates being as low as they are, this might be a good time to invest in some additional home insurance coverage, especially when it comes to flood insurance. A major flood event could be just around the corner, and extra caution could prevent financial hardship down the road. By using online tools to compare quotes, you could find some of the best cheap home insurance in California with minimal effort. 

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