This Hidden Risk Is Raising Home Insurance Costs — 3 Ways To Help Reduce Premiums
Written by
Martin Dasko
Edited by
Cory Dudak
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With major events like the Los Angeles wildfires and Hurricane Helene becoming more common due to climate change, home insurance premiums are increasing for Americans. As consumers continue to struggle with inflation, these premiums could become a more significant drain on household budgets in 2026.
According to research shared by American Progress, the U.S. experienced 27 different billion-dollar weather and climate disasters in 2024, which resulted in total damages of $183 billion.
GOBankingRates consulted with financial and insurance experts to learn more about the one factor that may increase your home and property insurance premiums and what you can do about it.
The One Thing That May Increase Your Home Insurance Premium
With climate change altering historical patterns, the number of catastrophic events that were considered low probability has gone up. The research also noted insured losses across the U.S. reached $112.7 billion in 2024 — a 36% increase on an annual basis. As insurers reduce coverage and leave risky markets, challenges arise in terms of affordability and availability for the average American looking for property insurance.
The research shared by American Progress highlighted that climate change-fueled extreme weather events are significantly impacting insurance markets, as insurers reduce coverage, abandon high-risk markets, and substantially increase insurance premiums. This means many Americans are in a situation where property insurance is either unavailable or unaffordable based on where they live.
A 2024 analysis from the Consumer Federation of America found 7.4% of American homeowners were uninsured, leaving around $1.6 trillion in unprotected market value. With houses being the most valuable asset for most middle-class Americans, homeowners are taking on a significant risk by forgoing insurance coverage, as they would face substantial financial losses if their property were damaged or destroyed.
Max Dugan-Knight, a climate data scientist at Deep Sky Research, noted that property insurance premiums are increasing because, as the level of risk increases, insurers risk losing money if they don’t raise premiums. He explained that premiums are determined using a mathematical technique called “frequency-severity modeling,” which aims to predict both the frequency and severity of an event. If this model indicates that future events will pose a greater risk than past ones, premiums will continue to rise due to the increasing likelihood of catastrophic events.
Dugan-Knight elaborated, “Insurance premiums will increase faster than inflation if climate risk is growing faster than other price increases across the typical basket of goods.” The unfortunate consequence is that Americans must spend more on insurance premiums, even if they don’t make claims, due to rising climate concerns that continue to impact the insurance market.
“Climate-fueled weather events impact a property’s insurance premium specifically because properties in these areas are more susceptible to damage, and this drives up the cost of insurance premiums,” remarked Aaron Razon, a personal finance expert at Couponsnake. Based on research from Deep Sky, home insurance premiums have gone up 42% in the most fire-prone areas of California. However, even those in areas unaffected by climate issues are still seeing their premiums go up.
How Can You Save Money on Home Insurance?
If your home insurance premiums have increased and it’s hurting your household budget, you’ll want to take the following measures:
1. Compare Insurance Policies
As always, it’s recommended that you compare home insurance options and explore the possibility of a multi-policy discount. You can bundle your insurance policies (like car and home together) to save money.
Dugan-Knight noted that if you have the luxury of multiple choices, you’ll want to ensure that the coverage is comparable instead of just going with the cheapest option. You want to review what’s covered and what’s excluded so you know what you’re getting into. Consider shopping around until you find a policy that matches your budget and situation. With online tools, it’s easier than ever to explore your insurance options.
2. Take Safety Precautions for Discounts
Dugan-Knight acknowledged that sometimes, insurers will lower your premium if you take specific risk-mitigating measures. In the case of flooding, that could mean adding waterproofing to your basement or installing a sump pump. The precautions will depend on the area where you live. However, you can look into simple measures like upgrading your windows or investing in a home alarm system.
3. Consider Your Living Situation
Razon emphasized the single factor that can increase your home and property insurance premiums, regardless of the type of insurance you have, is the risk level of your property. This includes factors such as its exact location and the condition of your home.
Dugan-Knight warned that if you live in an area where affordable home insurance is truly inaccessible, you need to consider your financial safety net and your risk tolerance. He elaborated, “As painful as it is to consider, some people are going to be forced to relocate due to growing climate risk, and the sooner you take action, the better.”
While you may not be in a position to relocate in the near future, it’s important to take some time to learn about the impact of climate change and natural disasters that are impacting your insurance premiums.
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