Home insurance premiums have been growing at nearly double the rate of median income since 2019, with costs growing fastest in areas with higher climate risk, according to a Zillow analysis. Of the five metro areas with the highest growth in insurance premiums over the past six years, three are in Florida.
Leading the country is Miami, where residents experienced a 57% spike since 2019, said Zillow. That is likely due to the major risk of extreme wind, accounting for $1.4 trillion of residential real estate in the market.
Jacksonville residents have seen their insurance premiums grow 51% since 2019, and Orlando’s have shot up 49%, also due to the major risk of extreme winds impacting virtually all homes in those markets. Richmond, Virginia, is also susceptible to these events, causing its premiums to surge 48% during the past six years.
Sacramento has seen a 54% growth rate in insurance premiums, which placed it second on the list. Homes in the market face a substantial risk of wildfire, according to the analysis.
Overall, insurance costs range from $1,200 to $4,000 per year for typical homeowners in the largest metro areas, comprising about 2% of household income. Since 2019, the typical annual premium has increased by $500, said Zillow.
This varies widely by geography, however. For example, premiums have increased by only 14% in Boston, equating to an additional $267 per year, while insurance premiums in Miami have increased by $1,478 over the same period.
Zillow said the financial impacts also feel different depending on whether the homeowner is a first-time buyer, a retiree on a fixed income, or a landlord with multiple homes in an area facing high climate risk.
“The pinch of an insurance price spike may not be that painful for those who currently own their home, but it could make the financial hurdle of homeownership even bigger for first-time buyers,” said the report.
Rising insurance premiums are making an already challenging affordability environment even more difficult, said the report. The cost of insurance is likely to continue on an upward trajectory, and some reports are already showing that higher insurance premiums are increasing the probability of delinquency, Zillow said.
However, the analysis revealed that increased insurance premiums would not substantially reduce the stock of affordable homes in most markets.
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