New study reveals troubling factor driving up costs for home owners: 'Potential to wreak havoc'

Home insurance costs have skyrocketed in recent years, with premiums rising an average of 24% between 2021 and 2024.

While inflation and rising rebuild costs are major contributing factors, AZ Central reported the Consumer Federation of America has revealed another, more concerning factor: extreme weather. 

What's happening?

The report, titled "Overburdened: The Dramatic Increase in Homeowners Insurance Premiums and Its Impacts on American Homeowners," looked at insurance company rate filings over three years. It found all kinds of eye-popping numbers related to rising homeowners insurance costs.

According to the report, premiums rose in 95% of U.S. ZIP codes between 2021 and 2024. States that saw the most significant percentage increase were Utah (59%), Illinois (50%), and Arizona (48%). These increases cost single-family homes an extra $21 billion over the three-year period. 

The report cites the changing environment as one of the most significant factors in these skyrocketing numbers. 

"Due to climate change, the nation has experienced stronger and more frequent natural disasters, including larger and more powerful hurricanes, a longer and more destructive wildfire season, heavier rainstorms, tornadoes, hail, and other extreme events," it reads. "These disasters not only increase costs but also lead to increasing expectations of loss, which drives up premiums as insurance companies attempt to better predict future events." 

Why is this report important?

While the economic factors involved in these premium increases can potentially be resolved as the economy steadies, extreme weather will continue indefinitely. It's even projected to become more extreme as the planet continues to warm. Meanwhile, many are already foreseeing an impending crisis.

"Skyrocketing double-digit increases in homeowners' insurance premiums and the potential inability to find adequate insurance, particularly in areas prone to wildfire, have the potential to wreak havoc on household budgets in Arizona," said the executive director of the Arizona Public Interest Research Group, Diane E. Brown, per AZ Central.

This report is significant, as it acknowledges a huge, untenable issue in rising insurance premiums while also pointing to the wider issue: Unaffordable insurance is yet another way our changing climate can devastate communities. 

What's being done about rising insurance premiums?

Extreme weather events can't be stopped, but owners can better protect their homes from them. Things like double-pane windows or fireproof roofing help prevent household disasters while also removing insurance companies from the equation in many instances. 

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This concept is essentially what the Consumer Federation of America report offers as a potential solution to rising premiums. The report calls for a greater investment at the state and federal levels in disaster-resilient housing. It also calls for insurance companies to be required to reward loss-prevention investments with lower premiums.

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