The dream of homeownership in America is becoming harder to achieve—not only because of rising mortgage rates and record home prices, but also due to soaring homeowners insurance premiums.
Just a decade ago, mortgage brokers like Andrew Cady of UMortgage in Inlet Beach, Florida, would set aside about $120 per month for insurance when qualifying buyers. Today, that number has more than doubled. “Now, you don’t prequalify a client unless you’re holding at least $250 to $300 a month for insurance—and that’s if the house is in really good condition,” Cady explained in a recent interview.
The Numbers Behind the Surge
According to a study by Insurance.com, home insurance premiums from major U.S. carriers climbed 10.4% in 2024 after jumping 12.7% in 2023. Over the past five years, average premiums have skyrocketed 53.1% nationwide.
For buyers, the impact on affordability is dramatic. With mortgage rates hovering near 6.5% and the median home price hitting a record $435,300 in June 2024 (per the National Association of Realtors), insurance adds another financial roadblock.
Cady explains it in plain numbers: “Every $100 increase in monthly insurance costs reduces a buyer’s purchasing power by about $16,000.” In other words, if a buyer qualifies for a $400,000 home but insurance premiums come in $300 higher than expected, their budget falls closer to $352,000.
Why Insurance Has Gotten So Expensive
Several forces are driving premiums higher:
Construction Costs: The Insurance Information Institute reports that rebuilding costs tied to claims rose 55% between 2020 and 2022, thanks to labor shortages and supply chain issues.
Natural Disasters: NOAA data shows that 2023 alone saw 28 separate billion-dollar weather disasters, causing nearly $93 billion in damages.
Regional Risks: States like Colorado (+76.6%), Nebraska (+72.3%), and Utah (+70.6%) saw the steepest six-year increases in premiums, according to LendingTree. Not a single U.S. state saw a decrease in 2024.
Florida’s Crisis: Florida remains the nation’s most expensive state for homeowners insurance. A 2024 report from Insurify pegged the state’s average annual premium at $14,140, with projections climbing to $15,460 in 2025. In Hialeah, just outside Miami, the projected average soars to nearly $26,700 annually—the highest in the country.
And tariffs may worsen things. Insurify notes that new tariffs on construction materials could add $4 billion in costs, which insurers would inevitably pass down to homeowners.
When Insurance Derails Home Deals
Lenders typically cap a borrower’s debt-to-income ratio (DTI) at 43% for most conventional loans, though some programs stretch to 50%. But with premiums climbing so sharply, buyers who once qualified for a home may suddenly find themselves over the limit.
Matic Insurance recently surveyed mortgage professionals and found that 68% of lenders said insurance costs are pushing DTI ratios above program limits, and nearly 60% reported loan delays tied to insurance coverage issues.
Cady recalls seeing a Fort Lauderdale property with an annual insurance premium of $19,000—almost as high as the homeowner’s entire principal and interest payment. In these cases, buyers are forced to either downgrade to a cheaper property or give up coastal living altogether.
What Homebuyers Can Do Right Now
While homebuyers can’t control the weather—or inflation—there are steps to manage the insurance burden:
Shop Around Aggressively – Work with an independent broker who can compare multiple carriers. Premiums can vary by thousands of dollars for identical coverage.
Get Quotes Early – Don’t wait until you’re under contract. Request quotes for each home you’re considering so you don’t get blindsided at closing.
Weigh Trade-Offs – Sometimes living inland or accepting fewer home features can dramatically lower premiums compared to coastal or high-risk areas.
Review Your Policy Annually – Even if you’re loyal to one insurer, rates change quickly. Make annual reviews part of your routine.
Check Your Coverage – If your home’s value has increased significantly, your replacement coverage may not be enough to rebuild in today’s market.
Don’t Ignore Flood Insurance – Standard homeowners insurance doesn’t cover flood damage. According to Bankrate’s analysis of FEMA data, policies under the National Flood Insurance Program average around $898 per year, though private coverage can cost more.
Bottom Line
Home insurance is no longer just a “line item” in the homebuying process—it’s a major factor in affordability and loan approval. With premiums expected to keep rising, buyers must get proactive: compare policies, adjust expectations, and factor insurance into their budget from day one.
Sources: Insurance.com, Insurance Information Institute, NOAA, LendingTree, Insurify, Matic Insurance, Bankrate