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Insurance companies are hiking the cost of homeowners coverage to offset the growing risk posed by powerful storms of the kind that ripped across five states over the Memorial Day weekend.
The stormsleft a trail of destructionin Arkansas, Kentucky, Oklahoma, Texas and parts of Virginia, leveling homes and killing at least 23 people. The increasing frequency and severity of extreme weather — which scientists link to climate change — means bigger payouts by insurers, leading to higher premiums for millions of Americans.
“It goes without saying,” Oklahoma Department of Insurance Commissioner Glen Mulready told CBS MoneyWatch. “Everyone is taking a hit with these storms, and that has to lead to increased premiums to cover those losses. It’s unfortunate but it’s true.”
In Oklahoma, the price of homeowners coverage surged 42% between 2018 and 2023, according to ananalysisfrom S&P Global. In 2024, the state has already experienced more than 90 tornadoes — more than double the number of twisters Oklahoma would ordinarily see at this point in the year. Making matters worse, Oklahomans have endured two Category 4 tornadoes this year, Mulready noted.
Homeowners insurance rates in Arkansas and Texas soared 32.5% and 60%, respectively, between 2018 and 2023, according to S&P Global.
Insurers have also raised homeowner premiums in states including Illinois, North Carolina, Oregon and Utah in recent years, in part because of extreme weather, said Scott Holeman, spokesman for the Insurance Information Institute.
Severe weather isn’t the only reason homeowners’ policies are getting pricier.
“In the past year, we’ve seen losses for insurance companies pile up because of storms, natural disasters, inflation and supply-chain issues,” Holeman told CBS MoneyWatch. “The result is many insurers are still in the red despite sharp increases to premiums. In four of the last five years, homeowners’ coverage has been unprofitable for insurers.”
Researchers at National Oceanic and Atmospheric Administrationsayextreme weather events are increasing both in frequency and severity. In 2023, the U.S. experienced a record 23 billion-dollar weather and climate disasters, according to scientists. Researchers link such events, includingcatastrophic flooding, heat waves,severe droughtsand massivewildfires, to global warming.
The growing financial losses tied to extreme weather events has led insurers including Allstate and State Farm to stop renewing home policies in parts of California and Florida. AAA last year also decidednot to renewsome policies in Florida, a state that has seen an increase in powerful storms and coastal flooding.
Meanwhile, some insurers that have continued to offer coverage in states vulnerable to extreme weather areraising their rates. Travelers Insurance, for example, this month got the OK from California regulators this month to raise homeowners’ rates an average 15.3%.
Nationally, the average homeowners insurance premium jumped from $1,081 in 2018 to $1,522 last year for people in a single-family property with a 30-year home loan,according to mortgage buyer Freddie Mac. ]
Property damage from a natural disaster “is one of the largest financial risks” a homeowner can experience,accordingto a May study by the Federal Reserve. Almost 2 in 10 U.S. adults reported being financially impacted by a natural disaster or severe weather event in the past 12 months, the study found.
