Home Insurance Costs Increase Across the U.S., Driven by Hail and Economic Factors
Home insurance premiums are increasing nationwide, with significant rises observed in areas not typically associated with major hurricanes or wildfires. This trend is largely attributed to severe weather events, particularly hailstorms, alongside broader economic factors such as inflation in labor and material costs.
Impact of Hailstorms: The Cozad, Nebraska Case Study
On June 29, 2024, a storm featuring hurricane-force winds and softball-sized hail caused widespread damage in Cozad, Nebraska, a town of approximately 4,000 residents. The storm resulted in damage to vehicles, roofs, siding, and windows across the community. The Cozad Community Hospital, the sole hospital in town, experienced significant structural damage, leading to the temporary closure of its emergency department and ongoing repairs more than a year later. The local insurance agent, Brian Messersmith, estimated the property damage from this single event at $100 million.
While hailstorms often remain localized events, researchers indicate an increasing likelihood of extremely costly hailstorms in the United States. Deborah Bathke, Nebraska's state climatologist, notes that weather conditions conducive to large hail have become more common across the central and eastern U.S. Projections suggest the Great Plains may experience more frequent hail events as global temperatures rise.
Financial Pressures on the Insurance Industry and Consumers
The central United States is identified as a region with high hail risk. According to Scott St. George, a climate scientist at WTW, hail events frequently cause extensive property damage without high fatalities, affecting a wide range of insured assets including homes and vehicles. The Insurance Information Institute reported an estimated $160 billion in damage to homes nationwide from hailstorms in 2024, excluding storms with hail under two inches in diameter.
These escalating damage costs have influenced insurance companies to raise premiums. A January Treasury Department report indicated that national insurance costs increased approximately 8% faster than inflation between 2018 and 2022. The report also found that property insurance prices in the Great Plains were substantially higher than the national average, with consumers in the Northern Plains paying about 20% more and those in the Southern Plains over 45% more. In Nebraska, the average cost of homeowners insurance in 2024 reached nearly $6,400, ranking it as the highest in the country and nearly $4,000 above the national average.
Beyond weather events, Robert Gordon, a senior vice president at the American Property Casualty Insurance Association, cited inflation, particularly in labor and construction material costs, as a contributing factor to rising insurance prices.
Industry Performance and Consumer Challenges
Despite rising premiums, the insurance industry experienced $26 billion in profits in 2024, following a loss of over $10 billion in 2023, according to credit agency AM Best. Industry representatives state that price adjustments reflect the substantial costs associated with rebuilding after major disasters.
For homeowners, particularly in regions with historically lower costs of living like Nebraska, these increases present financial challenges. Josh Tapio, an insurance broker in Omaha, Nebraska, reported that average annual premiums for a $300,000 home in the state have risen from approximately $1,500 to between $3,000 and $4,500 within a few years. This surge in costs has led to increased inquiries from individuals seeking more affordable policies.
The rising insurance costs can impact property ownership. Jennifer McKeone, a Cozad resident, sold two rental properties after the hail storm because the available insurance policies would have necessitated rent increases beyond what tenants could afford.
Senior citizens, often relying on fixed incomes, are disproportionately affected by these cost increases. Baltazar and Soledad Avalos, whose Cozad home sustained significant damage, faced a 10% increase in their insurance policy cost, in addition to their policy not fully covering all repair expenses.
Reduced Coverage and Mitigation Efforts
In conjunction with higher premiums, many insurance policies now feature higher deductibles, requiring homeowners to cover a larger initial portion of repair costs. New policies may also offer less comprehensive coverage for roof replacement, often the most expensive repair after a hailstorm. Megan Fales, an insurance agent in Cozad, noted a trend among homeowners to opt for higher deductibles to lower monthly payments, with some intending to perform repairs themselves to reduce costs.
Businesses are also experiencing these changes. Following the Cozad hospital's roof destruction, its insurance company declined to renew the policy. The replacement policies available were more expensive and included a significantly higher deductible for roof damage. In response, the hospital's governing board chose to upgrade the building with storm-resistant roof materials, which resulted in some premium savings. However, the hospital continues to pay more for insurance while receiving less coverage compared to two years prior, a situation its CEO, Robert Dyer, described as challenging for financial sustainability.