Homeowners insurance is becoming increasingly unaffordable for the average American as extreme weather worsens and insurers withdraw from high-risk regions. Many homeowners find that even if they can buy a house, they cannot afford to protect it.
What’s happening?
In California and Florida, the lack of affordable homeowners insurance affects both new and existing homeowners, according to Real Estate News. Last year, 13% of realtors in California reported that at least one sale fell through because buyers could not secure insurance. That’s more than double 2023’s rate.
California’s temporary moratorium on insurance cancellations for homeowners in wildfire disaster areas expires in January. Its end is raising fears that more people will lose coverage.
The state’s public last-resort option, the FAIR Plan, has seen its exposure double in less than two years. The program recently requested a 35.8% rate hike. This was in response to concerns from the insurer about being able to pay claims after a major disaster.
“It’s very likely that more insurance companies will pull out of some areas in California, and this insurability crisis is only going to get worse in 2026,” said Patrick Blandford, founder of property insurance company Green Shield Risk Solutions, to Real Estate News.
Florida faces a similar crisis.
After a series of destructive hurricanes between 2017 and 2024 caused billions in damage, insurance companies began leaving the state. This pushed hundreds of thousands of people into the state-backed Citizens Property Insurance Corporation.
A recent investigation, however, found that Citizens wins over 90% of disputed claims in arbitration, according to ProPublica. State-run plans can impose surcharges on all policyholders to cover deficits.
Why is this important?
Hurricanes, floods, and wildfires are becoming more intense and expensive due to our changing climate
The insurance industry’s inability to adapt to the increasing frequency of disasters is breaking traditional risk models. This is causing insurers to withdraw from high-risk areas.
When insurance becomes even less accessible, that leaves homeowners footing the bill when it’s actually available in their area. They have to pay higher premiums for less coverage and limited financial protection.
For low-income homeowners, it’s even worse.
Using credit scores to set rates is illegal in California. But in states like Florida, where it’s legal, insurers can use credit scores to set rates. People with lower credit scores may pay nearly $2,000 more per year for identical coverage to their neighbors’.
“The insurance industry is gaslighting us when it says they price homeowners insurance policies to reflect climate risk,” said Moira Birss, senior fellow with the Climate and Community Institute. “Climate change is driving dramatic changes, … but instead of proactively helping to reduce the risks, the insurance companies are penalizing poverty.”
What’s being done about this?
Some policymakers are calling for stronger oversight of insurance pricing and investment in resilient housing and infrastructure. In October, California passed bills reforming the FAIR Plan.
For now, progress is limited, and experts warn the crisis could spread nationwide as extreme weather becomes more unpredictable.
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