By David Wignall

When Tom Bhramayana built his house in Denham Springs, La., just five years ago, his annual home insurance premium was $1,575. Today, it's $5,000 -- and rising. "It's a new house," he says. "The roof's brand new. The water heater's brand new." Yet Bhramayana has already had to switch insurers twice, each time with a significant cost increase.

Bhramayana, a real estate agent serving South Central Louisiana, knows he isn't the only homeowner facing soaring insurance prices. He estimates that half his clients are getting hit by insurance fees so high that owning a home is becoming unaffordable. "It's a nightmare," he says. "Insurance is so bad. It's starting to affect people that are on fixed incomes."

Last year, the average price of homeowner's insurance rose 10.4% nationwide, according to S&P Global. That is on the heels of a 12.7% rise in 2023.

According to a new study by Bankrate, those cost increases haven't been evenly distributed. In Louisiana, the average annual premium for a generic $300,000 home insurance policy was $6,274. In Vermont, the same plan cost $1,036. According to S&P Global, Nebraska saw a 22.7% effective increase in premiums in 2024 alone, the highest in the nation.

Real estate agents from across the country, contacted by Barron's for this story, say their clients are feeling the pain acutely. Since the pandemic, homeowners have seen their premiums skyrocket, even as insurers require them to shoulder expensive home improvements like roof renovations, tree removals, and hurricane-resistant windows in order to qualify for coverage.

Those spiking costs are one factor among many pushing the dream of homeownership out of reach for millions of Americans.

Insurance premiums have soared for a variety of reasons. Labor shortages and inflation have driven up the cost of construction. Insurers are passing the rising cost of reinsurance on to homeowners. Home values are rising quickly. Consumer credit scores are dropping, primarily due to the resumption of student debt repayments.

Climate connection. Weather and environmental risks are also having a major impact. "Climate risk is the main thing that's pushing home insurance costs higher and higher," says Natalie Todoroff, an analyst at Bankrate, a publisher focused on the insurance market. "If it's more likely that your home will get damaged, your insurance company has to price that risk into its policy."

Last year, global financial losses due to catastrophes totaled $151 billion, according to Verisk. In January of this year alone, damages from the Eaton and Palisades wildfires in Los Angeles reached more than $28 billion.

Those soaring catastrophe costs have, in part, driven major insurance providers like Allstate and State Farm to exit high-risk counties and states, reducing the supply of insurance even further. As millions of homeowners lose access to their old providers, many must obtain new policies from the dwindling pool of insurers who remain. The result is rising premiums.

Going without. Many of the biggest insurance bills are hitting communities with relatively low incomes. In New Orleans, the median household earns roughly $61,000 a year, below the national average. But the city bears some of the highest home insurance costs in the nation. Policies can cost more than $10,000 annually -- and that's not including flood insurance.

"People in New Orleans are being forced to sell their properties," Bhramayana says.

Many mortgage lenders require borrowers to have insurance, forcing homeowners to absorb the rising costs. But other homeowners, not mandated to own insurance, are now choosing to go without.

"There are people across the metro that aren't carrying insurance because they can't afford it," says Kathrine Kosmala, a Realtor who serves the Oklahoma City area, where costs are rising fast due to heightened risk of firestorms. "Anecdotally, some homeowners in East Edmond have gone from $3,500 last year to now over $10,000."

Hidden inflation impact. For many homeowners, insurance costs are eating up a greater share of their wallets. But the two most widely watched measures of inflation hardly account for home insurance costs at all.

The Consumer Price Index includes only renter's insurance in its basket of shelter costs. In contrast, the insurance costs paid by homeowners and landlords are considered financial investments and are therefore excluded.

The Personal Consumption Expenditures index does factor in the price of homeowner's insurance. But the Bureau of Labor Statistics first subtracts out the amount insurance companies are expected to spend on claims. As a result, what's left over makes up only a small amount of the overall inflation basket.

From an accounting perspective, the general de-emphasis of homeowner's insurance in inflation data is reasonable. But the result is that millions of Americans are feeling the pain from a cost barely reflected in national statistics.

That cost is likely to increase in the U.S., according to Bankrate's Todoroff. "It's just becoming a less insurable or safe place to build nationwide," she says.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

August 25, 2025 13:08 ET (17:08 GMT)

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