Rising insurance costs make homeowners consider moving

With a string of recent natural disasters and premium hikes, insurance concerns are rising to such a degree that a majority of homeowners think the costs may lead them to relocate, a new report finds.

If homeowners insurance rates head further upward, 57% of homeowners said they "may consider" or "would strongly consider" selling their homes or moving within the five years, according to the report from mortgage fintech Maxwell.

Close to half, or 46%, of the 1,200 homeowners surveyed by the point-of-sale platform provider also questioned whether they could continue to afford housing payments, given the surging costs of both insurance as well as property taxes, which have leaped in tandem with home values over the past few years. 

"It's clear; homeowners insurance and taxes are taking up an increasing share of a family's monthly housing cost," said Maxwell co-founder and CEO John Paasonen in a press release.

"Our survey highlights that people are worried — they're asking how they can afford to stay in their home, even if they have a low mortgage rate."

An overwhelming majority of 90% said their insurance costs increased in the past 24 months, with 6% reporting premiums up by at least 30%. Over half, or 57% of the respondents, said they were charged 10% to 30% more than two years ago. 

A similar large share of 93% are at least somewhat worried insurance costs will continue their upward trajectory in the next two years, Maxwell said. 

Their fears are well founded, as elevated risk from extreme weather events result in insurance providers leaving disaster-prone markets. Even when events occur in different parts of the country, the effect also tends to apply upward pressure across the country.

Long before 2025's devastating wildfires in the Los Angeles area, Allstate and State Farm had ceased issuing new policies in California. Providers have also made similar moves in areas hard hit by hurricanes, particularly Florida. 

Changes in California insurance regulations announced before January's disasters were designed to lure providers back and remove some of the stress on the state's own plans. California homeowners, who benefited from regulations that capped homeowners premiums, now look set to see their costs escalate as insurers may be forced to reconsider their strategy in the state. 

Even with their state's regulations keeping insurance affordable, 95% of Californians had already reported a rate increase over the past two years, with 15% seeing a jump of more than 30%.

Meanwhile, a 23% share of homeowners across the country expressed worries about the possibility their provider might drop coverage. Government-sponsored enterprises Fannie Mae and Freddie Mac require property insurance on the loans they guarantee. 

Residents of California and Florida were far more likely to raise concerns about losing their plans, with the concerned share in those states more than double the national rate at 57% and 48%. 

Another 5% of homeowners, who likely had mortgages paid off, said they were leaving their homes uninsured, with 44% of the subset citing the high cost of obtaining coverage. Eight percent found themselves without insurance after former providers dropped them. 

The rapid rise of insurance costs is not only affecting existing homeowners. Buyers in the final stage of their purchase transactions saw closing costs inch up by an average of 1% each month since February 2023, hampering already challenging affordability conditions, Maxwell found.  Over the past two years, insurance-specific closing costs have risen by an average of 29%.

In late January, Corelogic estimated insured losses from two of the largest fires in Southern California would run between $35 billion to $45 billion. Coverage for post-fire living expenses in some policies would raise numbers by approximately $500 million. 

Back-to-back hits from Hurricanes Helene and Milton last summer also caused damages between $10.5 billion to $17.5 billion to insurance providers, the real estate data provider previously estimated.