Christina Temple moved to Truckee, California, to buy her first home.
“We moved up here for a better life,” she said. “For two or three years, we got that taste.”
Then the insurance bills came. In 2017, the couple paid $1,100 to insure their tiny cabin. This year, a basic policy from the public FAIR plan, the state-run insurer of last resort, and supplemental private insurance will cost Temple $6,000. It’s likely to rise again.
“Now we’re back to watching each paycheck,” Temple said, “and budgeting for everything.”
Temple is among the many Americans watching their hold on homeownership slip away as insurance costs balloon beyond their ability to pay. There’s no easy fix. A combination of broad economic trends—labor shortages, inflation, higher reinsurance, rebuilding costs, and more costly and uncertain extreme weather events are driving up premiums.
Homeowners face an unsettling reality: Insurers pass these costs to consumers with higher rates and more restricted coverage. In some states, insurers have stopped issuing new policies altogether.
The Very Real Threat of Bankruptcy
According to AM Best (a global credit rating agency), underwriting losses among US property insurers totaled $47 billion in 2022 and 2023 alone. Property insurance premiums have risen by more than 30 percent since 2020, the last full year the industry posted an underwriting profit. Insurers are still fleeing markets. Seven of California’s top 12 carriers have curtailed coverage in the previous two years or gone bankrupt.
Nearly 10 percent of US homeowners are now forgoing insurance, double the recent rate. Sometimes, they sell their homes, citing insurance premiums rivaling mortgage payments. FEMA’s National Flood Insurance Program (NFIP) is the primary insurer offering plans in most communities nationwide.
Don’t expect the federal government to help if you go without coverage. FEMA disaster-relief payouts, which are need-based, average about $3,000 and only if the US government declares a disaster in your area.
“Government programs don’t make you whole after disasters,” warned Amy Bach, the co-founder of United Policyholders, a public interest advocacy group. By contrast, flood insurance claims pay around $66,000 on average, according to the NFIP.
Unaffordable US
Nancy Watkins, who analyzes insurance risks and pricing for the global consulting firm Milliman, predicts that more places in the United States will become unaffordable for the average person to insure, especially along the coasts.
“Because the risk is going up,” she said, “prices will go up.”
Federal and local governments are already buying out properties in places regularly exposed to flooding. Over the past 30 years, FEMA has spent billions of dollars on voluntary buyouts of more than 40,000 flood-prone properties. But that’s unlikely to keep pace with rising waters.
According to Harvard Law School professor Susan Crawford, millions of Americans may need buyouts by 2050. Only a tiny fraction of households will receive them at today’s pace.
Instead, Georgia Institute of Technology professor Brian Stone, who directs the university’s Urban Climate Lab, argued that the cost of insurance in risky places is likely to redraw the map of where people can live.
Looking Abroad
He pointed to Gatineau, a city in Quebec that experienced two 100-year floods within three years. The provincial government required owners of heavily damaged homes who received relief money to either leave the flood zone or relinquish claim to any public relief funds for themselves and future owners if they chose to rebuild.
Homeowners across Canada have been notified that anyone rebuilding in dangerous flood zones may lose out on relief funds.
Stone said this offers a preview for the rest of the world. “The forcing mechanism is going to be insurance buyouts,” he said. “But we have to do it before the crisis, not in the aftermath.”
