Property Insurance Has Become a Bigger Factor in Buying a House

Buying a house can feel like walking a balance beam. One careful, daunting step at a time. Rarely more than that.

If you’re a Millennial or Zoomer, you first just try to cobble together enough for a down payment. Next, you massage your cash flow to see if you can make the monthly payment.

Then, increasingly, you also add property insurance costs to your list of tasks.

The New York Times recently reviewed a new NBER research paper about property insurance. Since 2014, average annual premiums have increased by:

• 144% in Nebraska;
• 108% in Illinois;
• 104% in Maryland;
• 94% in Minnesota;
• 85% in Florida; and
• 70% in California

The article’s authors add:

“It’s not just the hurricane-prone coasts that have been affected by the reinsurance shock. In Colorado, where wildfires and hail pose the biggest threats to homes, the average homeowner’s premium has more than doubled in the last decade and median premiums have increased 74 percent since 2020.

And in California, 13 percent of real estate agents surveyed by an industry trade association said they’d had deals fall through in 2024 after buyers couldn’t find affordable insurance coverage.”

The trend seems unlikely to change. With each new natural disaster, insurance companies “reprice” the risk they face in that area.

And as climate change realities settle in with more people, repricing becomes starker.

The New York Times notes:

“After analyzing 74 million home payments — which included mortgage, taxes and insurance and were made between 2014 and 2024 — the researchers found that a rapid repricing of disaster risk had been responsible for about a fifth of overall home insurance increases since 2017. Another third could be explained by rising construction costs.”

If buying a house is challenging enough, why not just focus on that goal? Why not just figure out property insurance costs later?

Because your mortgage lender likely has a right to force you into even more expensive (replacement) coverage. And that’s a balancing act that you probably don’t want to attempt.

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About the author: Kevin Mahoney, CFP®

Hi, I’m Kevin. I’m the founder of Illumint and a financial advisor in Washington, DC. I specialize in financial planning for Millennials like you. As a Millennial father and Certified Financial Planner™, I empower our peers to invest with confidence and flexibility. If you’re new to Illumint, I’m glad you’re here – you now have access to free personal finance tips written specifically for Millennials. I encourage you to read, watch, or listen to the ideas I share about exchanging your money for memories with your friends and family. And then when you’re ready, please send me your thoughts & questions!