Homeowners insurance rates rose nearly 19% in 2023

The average price borrowers pay to insure their homes is up by almost 19% in the past year and over 55% since 2019, according to a study by Guaranteed Rate Insurance LLC.

That cost rose 18.85% in 2023 alone and 55.47% more than it did in 2019, according to the report from the homeowners insurance subsidiary of mortgage lender Guaranteed Rate, which spans five years of data, including almost 50,000 policies and more than 70 carriers in 2023.

The independent agent's study quantifies anecdotal reports of premium increases that can negatively affect mortgage qualification or performance as the cost plays a growing role in boosting debt-to-income ratios. 

"With the increase in premiums, we are seeing more pressure on DTIs. As a result, we work diligently with our customers and provide a host of solutions to lower their costs," said Jeff Wingate, executive vice president and head of insurance at Guaranteed Rate, in an email.

While increases have been seen as far back as 2020, they were initially more gradual, with a rise of just $56 that year when the average premium went from $1,108 to $1,164. It rose another $112 to $1,276 in 2021, by $174 to $1,450 in 2022, and finally by $273 to $1,723 last year.

Increases have varied by state. The highest between 2022 and 2023 occurred in Louisiana, where the average jumped by 34.3%. The lowest was in Montana at 6.2%. (Nebraska, New Mexico and West Virginia were excluded due to the lack of statistically meaningful data.)

Another finding in the report bore out other research suggesting the take-up of private flood coverage that some homeowners also need or want has grown as the shift to risk-based pricing in the national program has increased some premiums and its funding has become tenuous. 

Guaranteed Rate's customers increased their use of private coverage by 163% in the past year for zones where it's mandatory because the flood risk is high and for those where it's low or moderate, according to its report. 

Despite such challenges, consumers are finding ways to cope with their rising insurance costs, through increased comparison shopping, credit monitoring and higher deductibles.

The share of consumers opting for homeowners insurance deductibles in the $5,000 to $10,000 range rose by 49% in the past five years, compared to a 17% decline in those with $1,000 to $2,500 deductibles.

Where available, bundling with other policies like auto has on average provided homeowner insurance discounts of 5%-20%, according to Guaranteed Rate, while noting that there has been less availability of this in Florida, California, Texas, New York and New Jersey in particular.

Lack of availability can stem from particular fire and flood risks in markets like California or Florida where carriers have pulled back or out. It also occurs due to a disconnect between the rate state insurance companies allow and the one a carrier wants to charge, Wingate said.

Extreme weather events have become increasingly common and account for 70% of losses, so insurers have seen costs rise in many areas, he noted.

Despite this, the Guaranteed Rate report forecasts that soaring premiums could stabilize by 2025. 

That's because reports like one published last month by Fitch indicate that higher premiums are starting to improve carrier financials to the point where they could ease hikes, said Wingate. Also in some markets new entrants are spurring more competition.

Meanwhile, steps consumers can take to improve insurance rates in some cases include investing in home improvements such as fire resistant materials that can mitigate disaster risk.

Whether a carrier will adjust rates in response to such measures varies, but some view an improvement like a new roof that will hold up well in a hail storm as favorable, Wingate said.