Cumulative effects of individual storms

Most of the states with rate increases of more than 20% in 2024 didn’t see a single big disaster, but multiple storms throughout the year. Hail damage claims are among the most expensive for insurance companies, and these storms occur throughout the year, sometimes affecting the same areas and the same insured homes more than once.

In 2023, multiple convective storms (storms that can produce a variety of impacts from rain to high winds) caused billions in damage. According to the 2024 Severe Convective Storm Report from industry data resource CoreLogic, over 10 million homes were hit by hail of one inch or larger between mid-March and November of 2023, creating an aggregate loss on par with a major hurricane.

Interestingly, however, the data show that much of that hail fell in states like Texas and Missouri. And while there was a 19% increase in hail activity in Nebraska, it was actually lower in Montana, Iowa and Minnesota. But that doesn’t mean the cost of the hail claims wasn’t a lot higher, with inflation playing a big role.

And, of course, hail isn’t the only risk; most of the states on the list are also prone to high winds and major winter storms.

So what does that mean and how does it relate to the rate increases in those states? Let’s talk about how and when home insurance rates change.

The role of risk and insurance regulation

Insurance companies base rates on risk. It’s that simple, but how they get there is complex.  

Years of risk data are available for every state, city, and ZIP code, and that informs how insurance companies set rates. It can take several years for rates to respond to past events. Additionally, state regulatory agencies play a role in how and when an insurance company can raise rates.

So it’s complicated, but the bottom line is that if insurance companies are paying out a lot in claims, they will raise rates to cover the losses. But those rate increases don’t show up on your bill until they’ve cleared regulatory agencies and your policy comes up for renewal.

In other words, rates in some states are responding to risks and costs years in the making. And while California’s intense wildfires and Florida’s wild hurricanes create sudden, widespread damage, the damage done by storm after storm across the plains pushes up the losses over time. While the insurance crises in some states are expected, homeowners in many other states are seeing rate increases that don’t make the news but have the potential to create a crisis of affordability.

And as insurers look into a future of increasing risk, rates rise in anticipation of major losses. Take a look at FEMA’s risk map for hail and for strong winds and you’ll quickly see what insurance companies see in states like Nebraska and Iowa. Meanwhile, wildfire risk is high across the Western states.

A widespread crisis for home affordability

Nebraska, which saw the greatest increase in rates in 2024, was already one of the most expensive states in the U.S. for home insurance. The average cost of home insurance there, based on 2023 rates, was $4,800 a year for a policy with $300,000 in dwelling coverage, $300,000 in liability and a $1,000 deductible. Meanwhile, the median income for a four-person family in Nebraska was $89,325 a year in 2024, according to the Administration for Children and Families. 

The average price of a home in Nebraska as of December 2024 was $272,000, per ATTOM Data, a real estate data service. It’s important to remember that this is the market value; it’s not the amount of coverage needed for insurance, which is based instead on the replacement cost of the home. So for the sake of the math, let’s assume the house needs $300,000 in replacement cost coverage.

A quick calculation places the mortgage payment for such a home at just under $2,100 a month, based on a 20% down payment (best case scenario, with a lower down payment, primary mortgage insurance would be an additional cost on top of a higher monthly payment) and a 6.85% interest rate, average according to Freddie Mac at the time of writing. Add property taxes and a $400-a-month home insurance payment, and the annual cost of owning that home is just under $25,000. That’s nearly 28% of the median income noted above.

It’s not hard to see how rising insurance costs will make it harder for people to afford homeownership. As the threat of tariffs and increased construction costs drives insurance companies to recalculate ever-higher replacement costs, those rates will only go up.

What homeowners nationwide need to know

It’s likely that the increased risk that’s already driven home insurance companies out of states like California will spread, and rate increases will continue.

In 2023, S&P Global’s report found 25 states had double-digit rate increases; for 2024, it was 34 states. And while both Florida and Texas had a reprieve this year, those states were already facing high insurance costs that haven’t come down.

It’s clear that the crisis in the home insurance market is spreading, quietly affecting millions of Americans well beyond the areas struck by multi-billion dollar natural disasters. 

So, what can homeowners do to fight higher costs? Insurability will become a major factor.

Reducing risk on your property can make it more appealing to insurance companies and earn you lower rates. California already requires home insurance discounts for wildfire mitigation, and Florida requires similar discounts for wind mitigation.

But upgrades to the materials on the outside of the home will make the biggest dent. A new roof brings one of the biggest rate reductions; upgrade to hail-resistant shingles, and you’ll save even more.

Beyond what the average homeowner can do, a big part of the puzzle will be the cost of construction materials in the coming years, which is difficult to predict but seems likely to rise. And over that, homeowners have no control.

It’s clear that homeowners across the country should be prepared to pay more for home insurance in the coming years. Taking steps now to make your home more insurable will help mitigate the increases.

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