Homeowners paying more for less insurance

Homeowners already stretched by high mortgage payments may be strained even more by another escalating expense: homeowner's insurance.

The average premium for a new policy has climbed to $1,966 in 2025, a 9.3% jump from last year and more than 61% higher than five years ago, according to online insurance agency Matic. At the same time, average policy coverage has risen just 35.8% since 2020, leaving many households paying more for less protection.

For some, the strain is severe.

"Homeowners are dedicating a larger portion of their monthly mortgage payments to insurance, with some borrowers reporting that over half of their payments now go to insurance and taxes," the report said.

These costs are limiting purchases, pushing some to consider selling, and in some cases making it harder to maintain a home at all.

The problem is spilling into the mortgage market. In a separate survey, 64% of lenders told Matic they'd run into insurance-related issues in the past year, including delayed closings or deals falling apart entirely.

Climate change drives costs

The biggest culprit: extreme weather. Hurricanes, wildfires, floods and other climate-driven disasters are hitting more parts of the country than ever before, pushing insurers to raise rates or limit coverage.

States prone to flooding or wildfires are seeing the steepest hikes. Mississippi premiums rose 27.4% in the past year, while Colorado saw a 26.9% jump. Wind and hail are now the leading cause of claims nationwide, and many insurers are charging separate — and costly — deductibles for that coverage.

Recent disasters underscore the risk. January's California wildfires caused an estimated $45 billion in damage, while last month's deadly floods in Central Texas killed more than 100 people. More homeowners are turning to private flood insurance to fill gaps in coverage.

Tariffs could push premiums higher

Trade policy is also adding pressure. Since January, President Donald Trump has threatened tariffs on materials like lumber, steel, aluminum and copper, potentially adding up to $11,000 to the cost of a new home, according to the National Association of Home Builders. Because insurance is priced in part on a home's replacement cost, higher construction costs can mean higher premiums.

The Matic report is the latest in a series of warnings about insurance affordability. In March, ICE Mortgage Technology flagged a similar surge in premiums, and in February, mortgage fintech Maxwell found 57% of homeowners would consider moving if rates keep rising.

For lenders, Matic's advice is clear: stay involved in the insurance process to help borrowers avoid last-minute snags — and keep the housing market moving.