Rising US home insurance costs strain household finances

Financial Health Network has published a report on how rising home insurance costs are affecting household finances in the United States. It says higher premiums and reduced cover are straining budgets and putting pressure on homeownership.

The report argues that home insurance should be treated as a core financial health issue as premiums rise, policy options narrow and confidence in insurance protection weakens. It draws on existing research and structured interviews with more than 30 experts, including regulators, reinsurance brokers, mortgage lenders and consumer advocates.

One of its central findings is that insurance costs are making it harder for prospective buyers to get onto the housing ladder. Because premiums are included in debt-to-income ratios, rising insurance bills reduce the amount some borrowers can secure and can stop deals from going through.

Research cited from the Federal Reserve Bank of Chicago links a USD $1,000 increase in annual premiums to a significant rise in mortgage denials. The report also says insurance is taking a larger share of household income, citing Insurance Research Council data showing that share rose from 1.2% in 2000 to 2.1% in 2022.

For existing homeowners, the pressure does not end after purchase. The report points to research from the Federal Reserve Bank of Dallas linking higher premiums to a greater likelihood of missed mortgage payments. It also says some households affected by Hurricane Milton and the California wildfires fell behind on home loans soon after those events.

Many households are also taking on more risk to contain costs. Some homeowners are increasing deductibles, cutting cover or dropping insurance altogether, leaving themselves more exposed to losses that could damage long-term wealth.

Fewer options

The availability of cover has also worsened across large parts of the country. Non-renewal rates rose in 35 states between 2018 and 2023, according to figures cited from the Senate Budget Committee. The number of residential policies in state insurer-of-last-resort plans also increased 77% from 2019 to 2024, based on data from the Federal Insurance Office in the US Department of the Treasury.

The report describes this as an affordability-availability paradox. Efforts to suppress premium rises can discourage insurers from staying in a market, while allowing higher rates can leave households unable to afford protection.

Renters are also affected. Owners of multifamily and affordable housing are facing sharp commercial insurance increases, which can feed through into higher rents, deferred maintenance and cuts to resident services.

The wider backdrop is a decline in confidence among US households that insurance will protect them in an emergency. Financial Health Network's Financial Health Pulse 2026 US Trends Report found that 54% of households were at least somewhat confident their insurance would cover them in an emergency, the lowest share recorded since tracking began in 2018.

That same report found overall financial health weakening. The share of financially vulnerable households rose from 15% to 17%, including an increase among homeowners, while only 31% of households were classed as financially healthy.

State pressures

The report uses four state case studies to show how market stresses vary by geography and regulation.

In California, it says years of strict rate regulation kept premiums below underlying wildfire risk, leaving homeowners facing a steep adjustment once rates began to rise. Policies on the state's FAIR Plan, the insurer of last resort, have increased 152% since September 2022.

Florida offers a different picture. Litigation reforms have brought 17 new insurers into the state and reduced the policy count of Citizens Property Insurance Corporation by nearly 73% from its 2023 peak, the report says, while premium increases in 2025 were among the smallest in the country. Even so, Floridians still face some of the highest premiums in the US.

In North Carolina, a centralised rate-setting system has kept approved rates comparatively low, but the study says an estimated 63% of homeowners policies are priced above those rates through a mechanism known as consent to rate. In Alabama, home fortification has become central to the state's response, with retrofit grants of up to USD $10,000 and mandatory premium discounts. Homes built to the FORTIFIED standard had roughly 73% fewer claims after Hurricane Sally, though upfront costs can still exclude lower-income households, according to the report.

The study says no single factor explains the rise in home insurance costs. Instead, it points to inflation, more frequent and widespread natural disasters, higher replacement and reinsurance costs, population growth in high-risk areas and state-specific conditions.

Jennifer Tescher, Founder and CEO, Financial Health Network, said the issue now extends beyond insurance markets into household balance sheets.

"Owning a home is one of the greatest investments most Americans make and one of the most dependable ways American families build wealth, and insurance is what protects that investment," Tescher said.

"As confidence in insurance coverage hits an all-time low, more families are left carrying risk they can't afford. That makes home insurance a financial health issue for millions of households, including renters and first-time homebuyers," she said.

JPMorganChase supported the research. "Building savings and protecting wealth are both cornerstones of financial health, and rapidly rising insurance premiums are increasingly forcing American families to choose between the two - or, in some cases, removing that choice altogether," said Kathleen Dufraine, Managing Director, Flood & Insurance Executive, JPMorganChase.

"This research brings the household perspective into sharp focus. We're proud to support this work because clearer evidence about what families are facing is essential to developing sound, lasting solutions," Dufraine said.