US home insurance costs more expensive in areas of climate risk, study finds

Published 01/16/2025, 04:39 PM
Updated 01/16/2025, 05:25 PM
© Reuters. FILE PHOTO: A drone view of houses destroyed during the Palisades Fire in Malibu, California, U.S., January 15, 2025. REUTERS/Matt Mills McKnight/File Photo

By Andy Sullivan

WASHINGTON -Homeowners in areas most at risk of damage from hurricanes, wildfires and other climate perils pay far more for insurance than those who live in the least exposed areas, according to a U.S. Treasury Department study released on Thursday.

The survey found homeowners living in areas most at risk paid an average annual premium of $2,321, 82% higher than those who lived in areas least likely to be hit by damaging weather events. 

Those living in the riskiest areas also were more likely to be dropped by their insurers, the study of more than 246 million homeowners insurance policies between 2018 and 2022 found.

Insurance prices have risen broadly across the United States in recent years, as the industry has grappled with rising construction costs and a rise in extreme weather events linked to rising global temperatures. Climate change is fueling more powerful and destructive storms.

The Treasury Department study found that average homeowner premiums increased 8.7% faster than the rate of inflation between 2018 and 2022. 

© Reuters. A drone view shows a site with beachfront houses that burnt down in the Palisades Fire and some that survived, in Malibu, California, U.S., January 16, 2025. REUTERS/Mike Blake

Wildfires have ravaged large swaths of Los Angeles over the past week, killing at least 25 people and destroying more than 12,000 homes. Analysts estimate as much as $45 billion in insured losses, and insurance premiums are expected to rise in the wake of the disaster. Hurricanes also ravaged wide swaths of the southeastern United States last fall.

Previous disasters have thrown state insurance markets into turmoil, with residents of Florida and Louisiana struggling to find affordable coverage.

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