Home Insurance Report: Affordability Crisis Continues As Climate Risks and Tariffs Influence Market
Reading time • 10 minutes
By Matic
The home insurance market has faced a turbulent few years, marked by significant premium increases, affordability concerns, and challenges in policy availability. This instability is due to a combination of climate events, regulatory factors, and economic volatility. In this report, we explore the key trends shaping the home insurance market in mid-2025, examining rising premiums, changes in coverage, and how the broader market is evolving.
Affordability remains a top concern as premium increases continue
As of late 2024, signs of moderation in rate increases emerged as carriers regained profitability. This improvement is encouraging, but it remains uncertain whether this trend will hold, as macro factors such as climate events, regulatory changes, and the state of the economy continue to influence the market.
According to Matic’s data, the average premium for new policies currently stands at $1,966, a 9.3% increase from 2024. This follows an 18.8% increase from 2023 to 2024, and an 11.6% increase in the prior year. While these figures represent a stark contrast to the 3-5% average premium increases seen previously, the rate of increase has slowed.
Premium increases are also outpacing growth in Coverage A. Since 2022, premiums for new policies have increased by 45%, while Coverage A has increased by less than 12%, suggesting that policyholders may be receiving less coverage value relative to their premium costs.
The ongoing rise in premiums is driving significant concern about homeownership affordability. Homeowners are dedicating a larger portion of their monthly mortgage payments to insurance, with some borrowers reporting that over half of their payments are now allocated to insurance and taxes. A growing number of people are finding that home insurance is either limiting their ability to purchase a home or is causing difficulty in maintaining their current property.
Climate change continues to influence premiums and policy availability
The broader trend of escalating insurance costs is largely influenced by climate-related events. In prior years, coastal risks from hurricanes and flooding were the primary concern. Now, severe convective storms in the central U.S. have become a major driver of premium growth, accounting for 70% of global insured losses in recent years. As a result, areas that were once considered low-risk are experiencing rising premiums and limited coverage options.
Recent studies indicate that “Tornado Alley,” which traditionally encompassed the central Plains region, is moving eastward. The Southeast and parts of the Midwest are now experiencing increased tornado activity, a trend attributed to factors like rising temperatures, increased moisture, and atmospheric instability linked to climate change. This shift not only exposes new areas to tornado risks but also complicates risk assessment for insurers, as historical data may no longer accurately represent future threats.
In addition to convective storms, wildfires and flooding have become increasingly prevalent, further driving insurance price hikes and availability challenges. Significant events in 2025, such as the LA wildfires and devastating flooding in North Carolina and Texas, have underscored the growing threats to homeowners. Flood insurance, in particular, has gained attention as an essential component of coverage, highlighting the importance for homeowners to consider all potential risks in order to fully protect their property.
Local climate conditions also shape the variations in premiums by state. Colorado is a prime example of a state where climate-related risks, including wildfires and convective storms, have led to significant premium increases over the past year. Other states with steep premium increases include Mississippi, Georgia, and Texas.
| State | Premium Increase (%) | 2025 Premium |
|---|---|---|
| Mississippi | +27.4% | $2,810 |
| Colorado | +26.9% | $3,306 |
| Texas | +22.0% | $2,987 |
| Georgia | +19.4% | $2,063 |
| New York | +19.2% | $2,243 |
Deductibles rise to offset increasing premiums
Another key trend is a significant increase in deductibles on home insurance policies. Matic’s data reveals a 24.5% increase in the average deductible from 2024 to 2025, compared to 15% the previous year. These rising deductibles are particularly prominent in high-risk areas like Florida and Texas, where the frequency of hurricanes and other severe weather is higher.
Wind and hail deductibles are also becoming more common and more expensive in areas that were previously considered low-risk. Many policies that previously carried a flat deductible are now being written with separate percentage-based deductibles for wind and hail — often 1% to 5% of the home’s insured value, a much larger out-of-pocket cost for most homeowners.
This change is largely driven by the rising number and severity of wind and hail claims. Wind and hail damage accounted for 42% of all insured home losses between 2018 and 2022, making it the leading cause of home insurance claims during that period. More recently, it was reported that convective storms carrying strong winds and hail cost insurers $58 billion in the U.S. in 2024, with hail in particular accounting for the majority of damage. It’s also expected that hail will become less common, but larger and more destructive over time.
As the effects of climate change continue to escalate, carriers are seeking ways to offset rising claims expenses by sharing more of the cost with homeowners. Additionally, homeowners are increasingly willing to take on higher deductibles to lower their premiums.
All eyes on roofs: how roof age is impacting premiums
In recent years the insurance industry has seen an increase in roof-related claims, primarily due to severe weather events. In 2024 alone, roof claims costs totaled nearly $31 billion, up 30% from 2022.
While the age of a home has always been a key factor in determining premiums, roof age has now become a focal point for insurers when underwriting and pricing policies. This shift is driven by the recognition that roof claims are a major contributor to rising costs.
As a result, roof guidelines and requirements have become more stringent. Insurers are placing greater emphasis on roof condition when determining coverage eligibility and premiums. According to Matic’s data, the premium difference between homes with roofs less than 5 years old and those with roofs 11-15 years old was $49 in 2022. In 2025 that gap has widened to $155, showing just how much more important roof age has become in policy pricing — even before roofs are considered “old.”
To mitigate the rising costs of roof-related claims, many carriers are moving away from offering full replacement cost coverage for roofs. Instead, they are increasingly opting for Actual Cash Value (ACV) coverage, or introducing roof payment schedules. For example, a roof may be covered at 100% replacement cost when it’s brand new, but once it reaches 10 years old, coverage may drop to 60%.
Additionally, insurers are becoming more vigilant in their inspections with the help of tools such as satellite imaging, drones, and AI technology to assess roof damage more accurately and efficiently. These advancements allow carriers to better evaluate potential risks and reduce the likelihood of large, costly claims.
Policy availability: a slow recovery, E&S lines filling the gap
As the home insurance market stabilizes and the P&C insurance market regains profitability, carriers are easing some of the strict underwriting restrictions introduced in recent years. This shift is leading to a gradual improvement in policy availability, providing consumers with more options. Matic’s data reveals a 69% increase in available quotes per person from March 2024 to July 2025. While this rebound is encouraging, availability remains well below historical averages, particularly in high-risk areas.
The Excess and Surplus (E&S) insurance market has become an important solution for homeowners who struggle to secure coverage through traditional, admitted carriers. As of late 2024, the E&S market had seen growth increase by double-digital percentages over five consecutive years, driven by the emergence of new risks and reduced coverage availability in admitted markets. This trend is particularly pronounced in states like California, Florida, and Texas, where admitted carriers are either unwilling or unable to offer coverage due to extreme weather and challenging regulatory environments. As of mid-2025, E&S products account for 17% of Matic policies in these three states, a significant increase from less than 2% in 2023.
Unlike traditional insurers, who are regulated by state authorities, E&S insurers are not bound by the same state regulations. This lack of regulatory constraint allows them to provide coverage in more high-risk areas where admitted carriers often limit business. While E&S policies generally come with higher premiums and fewer consumer protections, they provide essential coverage for homeowners who might otherwise be left uninsured.
Insurance problems affecting loan closings in mortgage industry
The home insurance market continues to impact adjacent industries, particularly the mortgage industry. Since home insurance is a requirement to obtain a mortgage, lenders are facing challenges with loan closings due to the difficulties surrounding insurance. According to a recent survey by Matic, 64% of lenders reported experiencing issues with home insurance either frequently or somewhat frequently over the past year. Common problems include DTI (debt-to-income) ratios becoming too high once the cost of insurance was factored in and delayed closings due to the time it takes to secure adequate coverage.
In addition, 72% of lenders surveyed expressed being “very concerned” about how economic changes and uncertainty could continue to impact home insurance, and by extension, the mortgage process. This underscores the importance for lenders to be proactive and involved in the insurance process, helping borrowers navigate these challenges to avoid delays and facilitate smoother closings.
The impact of tariffs on insurance rates
The ongoing announcements related to tariffs under the current presidential administration are having a significant impact on the housing market. While some tariffs are already in place, others are expected to take effect in the near future, and their impact on construction material costs is becoming evident. In April 2025, 60% of home builders reported that their suppliers had already increased or announced price hikes due to tariffs. And the National Association of Home Builders estimates that tariffs could add nearly $11,000 to the cost of building a new home.
As one example, the recent announcement of a 50% tariff on copper — a key material in electrical wiring, plumbing, HVAC systems, and more — will likely have a direct impact on housing prices. Similarly, steel and aluminum tariffs have been reintroduced at 50% as of June 2025, affecting structural components and appliances used in home construction.
As material prices rise, so too will the cost to build and repair homes, which is expected to directly affect home insurance premiums.
Closing
Despite ongoing challenges, there are signs of gradual improvement. After a difficult few years, the U.S. P&C insurance industry has seen increased profitability in both 2024 and early 2025. However, uncertainty remains, particularly regarding availability and affordability, as macro factors such as climate events and the state of the economy continue to shape the market.
For homeowners navigating the changing market, it’s important to carefully evaluate options to mitigate rising costs. Consider reviewing your deductible to find a balance between lower premiums and manageable out-of-pocket expenses. Updating your roof or making other home improvements can also help reduce premium increases, as insurers are increasingly factoring in the age and condition of roofs when underwriting policies.
For those in high-risk areas or facing limited coverage options, E&S policies may provide a viable alternative, but they often come with higher premiums and fewer consumer protections. It’s important to weigh the benefits and risks before opting for these policies.
Moving forward, coordinated efforts from insurers and regulators will be crucial to solidifying a path toward stabilization.
