Wildfires, hurricanes, hail and rising rebuilding costs are changing the home-insurance market. In some parts of the country, homeowners are paying far more for coverage. In others, simply finding a company willing to write the policy is becoming part of the problem.
For years, homeowners in places like Florida and coastal Louisiana expected insurance to be expensive.
The more surprising change is what is happening elsewhere.
Home-insurance costs are rising in parts of the Midwest, Mountain West and interior South as insurers reassess the risk posed by hail, wind, wildfire and other severe weather.
The problem is increasingly national.
Insurance companies are looking at risk differently
Home insurance is ultimately a calculation.
An insurer collects premiums from a large group of homeowners and uses that money to pay claims when houses are damaged.
That becomes harder when major losses occur more frequently or become more expensive.
At the same time, rebuilding a damaged house costs more than it once did.
Labor, materials and property values all affect the potential size of a claim. Even if the number of storms stayed exactly the same, replacing a $500,000 home costs considerably more than replacing the same property when it was worth $300,000.
It is no longer only a Florida and California story
Hurricanes and wildfires still attract most of the attention.
But hail and severe thunderstorms can produce enormous aggregate losses because they damage roofs, siding and vehicles across wide populated areas.
That has helped push insurance costs higher in states such as Iowa, Oklahoma and Texas.
The geography of the insurance problem is broadening, and homeowners in places that were once considered relatively predictable are increasingly seeing higher premiums.
Some homeowners are losing choices altogether
Higher premiums are one problem.
Fewer insurers willing to provide coverage can be worse.
In some high-risk areas, private insurers have restricted new policies, reduced exposure or declined to renew existing coverage. That has pushed more homeowners toward state-backed or last-resort insurance programs.
This matters because insurance is usually not optional for someone with a mortgage.
Lenders generally require homeowners to maintain adequate property insurance. If coverage becomes unavailable or prohibitively expensive, the insurance problem can quickly become a housing-market problem.
Riskier areas are already paying considerably more
Homeowners in areas with higher exposure to wildfire, wind, hail or other natural hazards are increasingly paying much more for coverage than homeowners in lower-risk areas.
The difference is not just the premium.
Higher deductibles, narrower coverage and nonrenewals can all change the real cost of owning a house.
For homeowners, the effect can be immediate.
A house that was affordable when purchased can become considerably more expensive to carry if its insurance premium doubles.
States are trying different solutions
The insurance market is regulated largely at the state level, so there is no single national response.
States are experimenting with catastrophe funds, mitigation incentives, insurer-of-last-resort programs, changes to rate regulation and programs that reward homeowners for strengthening roofs or reducing wildfire exposure.
None of those approaches eliminates the underlying problem.
If insurers believe a property has become substantially more likely to suffer an expensive loss, someone ultimately has to absorb that additional risk.
It can be the homeowner through a higher premium.
It can be the insurer through greater exposure.
It can be the state through a public insurance program.
Or it can ultimately fall on taxpayers after a major disaster.
Home insurance is becoming part of the home-buying decision
For buyers, that may be the biggest change.
The monthly mortgage payment and property taxes are no longer enough to understand what a house will actually cost.
Increasingly, buyers need to know what the property costs to insure, whether multiple carriers will cover it, what deductibles apply, and how exposed the area is to risks such as wildfire, wind and hail.
A beautiful house can still be a difficult purchase if the insurance market around it is deteriorating.
That makes home insurance something it rarely used to be for most American buyers:
a question worth answering before deciding whether to buy the house at all.
