The rising costs of home and auto insurance
In recent years, homeowners and renters have seen a sharp increase in insurance costs. Homeowners insurance premiums have risen for 26 consecutive quarters, outpacing inflation by 40% from 2017 to 2022. From 2020 to 2023, home insurance premiums surged by 33%, with the average annual cost rising from $1,902 to $2,530. In 2024, the average cost of full coverage car insurance jumped to $2,543, marking a 26% increase in just one year.
These rising costs are largely driven by the increasing frequency and severity of natural disasters, resulting in record losses. In 2023 alone, the U.S. experienced 28 natural disasters, each causing over $1 billion in damages. Extreme weather events, such as California's wildfires and unprecedented snowstorms in the South, are reshaping the U.S. insurance and real estate markets, leading to higher premiums as insurers adjust to greater risks.
Property owners in states like California, Oregon, and Washington are particularly vulnerable to catastrophic weather events, including wildfires, floods, and earthquakes. These risks are driving up insurance costs, reducing the number of available providers, and leading to stricter coverage requirements. For example, California has introduced legislation requiring insurers to pay homeowners 100% of coverage for belongings in destroyed homes without itemized lists.
Insurers are becoming more selective about the risks they’re willing to take on, especially in areas prone to natural disasters. This leads to higher premiums, stricter underwriting standards, and potentially fewer options for consumers.
After ongoing rate increases, insurers are raising rates by an average of 7.5% in 2025. The average cost of auto insurance for 2025 is expected to reach a record high of $2,101 per year, according to The State of Auto Insurance in 2025.
As insurance companies adjust their rates to stay profitable, many households face a tough choice of paying higher premiums or forgoing coverage altogether. In fact, only 88% of homeowners had insurance in 2023, with many uninsured households earning less than $40,000 per year. This trend exposes families to significant financial risk and places a greater burden on federal disaster recovery programs.
