In
,
homeowners paid an average of
$2,564
last year for insurance,
0 percent
more
than other counties with the same level of
undefined
risk. Home values are
undefined than the national average, which may mean lower insurance prices.
Insurance costs are
2.0 percent
of typical home values,
undefined.
Source: Keys and Mulder, National Bureau of Economic Research (2024)
Note: State average is shown in counties with few or no observations.
Read the full story on why climate change is driving rates higher, but not always in areas with the greatest risk.
The cost of home insurance has jumped, and climate change is part of the reason.
The typical U.S. household paid $2,530 in home insurance premiums last year, which was 33 percent more than in 2020. That’s a bigger jump than inflation, which increased prices across the economy by 19 percent over the same period.
Part of the reason for that rise is climate change, according to Benjamin Keys and Philip Mulder, the authors of new research that tracks what Americans in different counties and ZIP codes paid for home insurance over the past decade. In general, they found that costs increased the most in the parts of the country with the greatest exposure to extreme weather.
In
, average premiums have
surged by $570 since 2020.
Source: Keys and Mulder, National Bureau of Economic Research (2024)
Some homeowners pay far more than others, even those with similar levels of risk.
One of the most surprising findings in the new research is that insurance costs don’t always reflect actual risk. Premiums are generally highest in the middle of the country and some parts of the Gulf and Atlantic coasts. But that’s not always where the danger from extreme weather is greatest.
The researchers also compared insurance premiums as a share of local home values. That’s a more precise measurement because it accounts for the fact that costlier homes are generally more expensive to rebuild. Using that measure, the gap between the cost of insurance and underlying risk was even more pronounced.
Gaps in the cost of insurance often reflect decisions by states.
Much of the difference in insurance premiums seems to stem from actions by state officials, who have the authority to approve rate increases. Some states use that power to keep rates low, while others hardly use it at all. Homeowners in states with more controls, like California, tend to pay less than those in states with a hands-off approach, like Oklahoma.
Ishita Sen, a professor at Harvard, has found that after insurance companies suffer big losses in states that are tightly regulated, they tend to raise rates in more loosely regulated states. That suggests that companies are using homeowners in some parts of the country to subsidize the cost of disasters elsewhere. Insurers deny this.
The distortions in home insurance costs can hurt everyone.
The distorted insurance market means some homeowners are stuck with especially high premiums, Dr. Sen said. But those who are paying insurance that is too cheap for the risks they face are also at a disadvantage, she said.
That’s because the cost of insurance is meant to be an important signal, giving homeowners an idea of their exposure to disasters like storms and wildfires. Artificially low rates can encourage people to build, buy and stay in dangerous areas, she said.
The way the home insurance market works now, Dr. Sen said, is “incentivizing all sorts of crazy behavior.”
Edited by Lyndsey Layton and Douglas Alteen.
Additional visual editing by Claire O’Neill and Matt McCann.
With assistance from Blacki Migliozzi and Michael Keller.
Methodology
Keys and Mulder calculated annual homeowners insurance costs by separating mortgage and tax payments from loan-level escrow data obtained from CoreLogic. County averages are the median insurance premium within counties with at least 10 observations.
To compare county average premiums against those of other counties with similar risk, all counties were broken into 20 percentiles based on a composite risk score and the median premium was found for each percentile.
Risk percentiles are based on a combination of FEMA’s National Risk Index expected annual loss rates per dollar of building value for cold waves, hail, heat waves, ice storms, lightning, strong winds, tornadoes, volcanic activity, and winter weather. Wildfire and hurricane risk data came from First Street Foundation, which separates flood risk from hurricane risk. Flooding is typically covered by the National Flood Insurance Program and is less likely to be reflected in the CoreLogic data.
Home value data come from Zillow.
Average insurance costs as a percentage of home value in each county were compared to the median across all counties to describe whether cost burdens were “about average,” “higher/lower,” or “much higher/much lower.”
Source: Elections - nytimes.com
