Over the past decade, climate-fueled extreme weather events and rising inflation have pushed the homeowners insurance market to the brink.
Things stand to get even worse this year.
A new report from insurance comparison agency Insurify projects that home insurance rates will rise by an average of 8 percent in 2025 across the U.S. States that face some of the most frequent and severe climate shocks—such as Louisiana and California—could face rate hikes of more than 20 percent, according to the report.
But the analysis doesn’t incorporate a recent development that could jack up insurance even higher: tariffs. In the past few weeks, President Donald Trump implemented these taxes on imports of major commodities such as lumber, steel and electronics—all crucial for rebuilding a home after disasters. As insurance companies struggle to turn a profit, costs could eventually be passed down to the consumer in the form of higher premiums, experts say.
A Climate-Stressed Market: Economists often refer to the insurance industry as the “canary in the coal mine” for climate change. In 2024 alone, weather and climate-related disasters such as wildfires and hurricanes caused around $320 billion in damages, according to an estimate from reinsurance company Munich Re. Insurers covered around $140 billion of these losses.
The U.S. insurance industry took a particularly hard hit after Hurricanes Helene and Milton in the fall, which were among the most destructive and costliest disasters of 2024.
“I just think that this is so important for people to be made aware that insurance rates are going up, and insurance makes the economy go and this is the tangible result of a changing climate,” Andrew Hoffman, a professor of sustainable enterprise at the University of Michigan, told me. “A lot of people can ignore climate change because ‘it’s going to happen to somebody else, someplace else, and in the future.’ And then it’s happening here and now, and it’s affecting my wallet, and that’s really changing the conversation.”
This year started with a bang as catastrophic wildfires tore through greater Los Angeles and decimated full neighborhoods. In January, I wrote about how these fires could have profound implications for an already climate-stressed insurance market in California.
Due in part to these fires and a new law that allows companies to factor future climate impacts into their risk models and pricing, Insurify forecasts that home insurance in the state will rise around 21 percent by the end of the year, for an annual rate of $2,930. Meanwhile, in hurricane-battered Florida, homeowners insurance may rise by 9 percent to $15,460—the highest of any state in the country.
Louisiana, which also sees its fair share of hurricanes, is projected to face the sharpest increase in annual premiums, potentially jumping 27 percent, according to the report. It’s currently the least profitable state for insurers; “for every $100 Louisiana insurers collect in premiums, they pay out $159 in claims,” the report finds. In New Orleans, some people are still recovering from damage left by Hurricane Katrina almost two decades ago—and homeowners now pay around six times the national average for insurance.
“Louisiana is especially fraught for insurers,” the report’s author, Insurify’s Matt Brannon, told me. “Hurricane Katrina is still the most expensive disaster in U.S. history, and that still sort of looms in the mind of a lot of insurers.”
But coastal states aren’t the only ones likely to face steep rate hikes. The Midwestern U.S. is highly vulnerable to tornadoes and hailstorms, which may be growing worse as climate change accelerates. In the U.S., hailstorms cost $10 billion in insured losses annually, more than the damage caused by tornadoes, lightning-caused fires and wind—combined.
Tariff Trouble: Since entering office in January, Trump has imposed a series of tariffs on dozens of countries, arguing that they will stimulate domestic production of goods and create jobs. In response, several countries such as China have enacted retaliatory tariffs on the U.S., and the domestic stock market has plummeted.
The tariffs will affect the prices of a variety of consumer goods, from kitchen appliances to cars. They will also hike up construction costs for homebuilders and, subsequently, insurance companies that cover customers who have lost their homes in extreme weather events.
Compounding the problem, Trump is implementing aggressive immigration policies that are pushing immigrant workers in the construction industry out of the country, which could also increase the price of building a home, according to David Marlett, the managing director of the Brantley Risk and Insurance Center at Appalachian State University in North Carolina.
“It’s unsettling, to be honest. This could be really bad,” he told me. “We already were in a bad situation, and this is just going to take it to another level.”
Marlett explained that insurance companies in most states are required to get government approval before increasing premiums, which can take months. This lag time could result in major losses for insurance companies that are paying more than expected for claims. Eventually, these costs could be passed down from insurers to consumers—or result in companies pulling out of the area, he said. Some companies could face bankruptcy after major weather disasters; in Florida, at least 16 insurance companies have been declared insolvent since 2017, largely due to costly hurricanes.
“By the time that the insurer is able to maybe get a partial rate increase, they’ve already had to sell a lot of policies that were essentially underpriced,” Marlett said. “Now you’re going to add massive tariffs on top of that, which are not included in those previous rate increases. So the insurers are going to be hurt financially because of that, and they’re going to become even more restrictive on providing coverage.”
In March, the National Association of Home Builders estimated that the tariffs on Canada and Mexico would raise the cost of imported construction materials by more than $3 billion. A recent New York Times analysis investigated the impact of immigration policies and some of Trump’s latest round of tariffs on the cost to build a single luxury home in Phoenix and found that it would have increased the overall price by several hundred thousand dollars.
However, Marlett emphasized that tariff policies can change frequently (and already have several times), which means their impact on the broader insurance market is currently up in the air.
In any case, some experts say that the insurance industry’s heavy climate burden should change how and where people are rebuilding after a disaster. Hoffman used to work as a general contractor, and I asked him what would be going through his head if he were working on a project right now.
“If I was building houses today, I would be cognizant of the cost of insurance and that making it more challenging to sell,” he said. “If insurance becomes unavailable, get ready, because you’re not gonna be able to sell it, because no bank is going to give you a mortgage without insurance.”
He added that there are some ways to mitigate the destruction a weather disaster could cause. For example, many California residents in fire-risk areas are hardening their homes against the flames by using fire-resistant building materials and ensuring that the area around the home is free of flammable materials. In some cases, homeowners can get discounts on insurance by taking these steps. But this work can be difficult for people in low-income and marginalized communities, who may not have the means to retrofit their homes and upend their lives to move to a less risky place.
Hoffman is among a group of experts who believe we should take more radical steps to avoid the collapse of the insurance industry in the face of climate change. In some cases, that may include not rebuilding after a disaster in a climate risk zone, he said.
“I think we need to have a serious conversation about building codes and zoning laws,” Hoffman said. “Should you be able to build anywhere you want? Should you be able to build in a floodplain? I don’t think so.”
This story was originally published by Inside Climate News and shared in partnership with the Florida Climate Reporting Network, a multi-newsroom initiative founded by the Miami Herald, the Sun-Sentinel, The Palm Beach Post, the Orlando Sentinel, WLRN Public Media and the Tampa Bay Times.
