Rising Homeowners Insurance Costs: How They Impact Mortgage Affordability—and What You Can Do
For years, the focus on home affordability has been dependent on two things: mortgage rates and home prices. Recently, a third factor has been quietly – but significantly – eating into monthly budgets: homeowners insurance.
According to the Insurance Information Institute, the average annual homeowners insurance premium in the U.S. rose 21% between 2022 and 2024, reaching roughly $2,300 per year. In some high-risk states, premiums have jumped by 40% or more as insurers adjust for climate events, rebuilding costs, and market pressures.
For a family buying a home, that extra $200-$300 per month in insurance costs can shrink the budget for their mortgage payment, making an already tight housing market feel even more out of reach. The good news is that with the right strategies in place, you can protect your budget and keep homeownership within reach.
Why Insurance Costs Are Rising
- Severe weather: Hurricanes, wildfires, and floods are driving insurers to raise rates in high-risk areas.
- Construction costs: Inflation in building materials and labor makes claims more expensive to cover.
- Reduced competition: In certain regions, some insurers have pulled out of the market entirely, leaving fewer options and higher prices.
How This Impacts Mortgage Affordability
When lenders calculate your ability to afford a home, they look at the full PITI payment (Principal, Interest, Taxes, Insurance). That means if insurance costs rise, you may qualify for a smaller loan amount, even if your income hasn’t changed.
What You Can Do About It
The good news is, you’re not powerless. Here are a few steps to manage and even reduce your insurance costs:
- Shop around early and often. Don’t assume your first quote is your best quote. Studies show that comparing at least three to five insurers can save you up to 20% annually.
- Bundle your policies. Pairing homeowners insurance with your auto or life insurance can unlock significant discounts. Some providers offer 10-25% off when bundled.
- Raise your deductible. If you have a solid emergency fund, consider raising your deductible. A move from $1,000 to $2,500 could lower premiums substantially, sometimes by 15% or more.
- Improve your home’s safety. Installing smart home monitoring, storm-resistant windows, or even a new roof can earn credits with insurers. Not only does this cut costs, but it also boosts peace of mind.
- Explore State or Federal programs. Some states have affordability programs or reinsurance backstops to stabilize premiums. A knowledgeable insurance agent can help you find options you might not know exist.
Staying Positive in a Shifting Market
Yes, rising insurance premiums add another layer of complexity to homeownership. But with careful planning and proactive steps, you can keep your dream home within budget.
At Summit Mortgage, we know affordability is about more than just interest rates, it’ds about your whole financial picture. By factoring insurance into your mortgage planning upfront, you’ll avoid surprises and be empowered to make confident, sustainable decisions.
The bottom line is that rising homeowners insurance costs are real, but they don’t have to derail your path to homeownership. With the right strategies and the right mortgage partner, you can stay ahead of the curve, protect your budget, and still find the home that fits your life.
Ready to get started? Find a Summit Loan Officer today!
