As of June 2024, homeowners in the United States typically pay an average annual premium of $2,230 for $300,000 in dwelling coverage. However, insurance costs can vary significantly depending on location, with geographic factors playing a major role in determining premiums. Homes situated in high-risk areas for natural disasters often face higher insurance costs compared to those in lower-risk regions, even within the same state. Other factors influencing insurance rates include the age and condition of the home, leading to potential variations in premiums across different areas.
Below is a comparison highlighting the average home insurance costs in several states prone to natural disasters, along with the average premiums in high-risk cities within those states:
2024 Natural disaster-related data and statistics
The NCEI categorizes the most significant natural disasters into 10 types in its Billion-Dollar Weather and Climate Disasters report. Since 1980, the United States has experienced 387 disasters costing over $1 billion each. Notably, every state has been affected by at least one billion-dollar weather event. Hawaii has encountered only two such events, including the Lahaina wildfires of 2023, making it the state with the fewest occurrences. Alaska follows with eight events, and Missouri has experienced 11.
The chart below illustrates four of the most common natural disasters in the U.S., focusing on hurricanes and tornadoes, which are responsible for substantial losses. Tropical cyclones, known for their strong winds and heavy rainfall, are the most frequent and damaging among them:
| State | Average annual premium | City at high risk of disaster loss | Average annual premium | Potential natural disaster |
|---|---|---|---|---|
| California | $1,453 | Lake Arrowhead | $1,910 | Earthquakes, wildfires and flooding |
| Florida | $5,533 | Miami | $10,473 | Hurricanes and flooding |
| Georgia | $1,945 | Atlanta | $1,884 | Hurricanes and flooding |
| Illinois | $2,189 | Chicago | $2,702 | Severe storms and flooding |
| Louisiana | $4,274 | Metairie | $6,031 | Hurricanes, tornadoes and flooding |
| Mississippi | $2,820 | Gulfport | $5,433 | Severe storms and hurricanes |
| North Carolina | $2,495 | Greenville | $2,759 | Severe storms, hail and tornadoes |
| Oklahoma | $4,700 | Oklahoma City | $5,476 | Tornadoes, wildfires, ice storms and flooding |
| Pennsylvania | $1,149 | Philadelphia | $1,662 | Severe storms, tornadoes and flooding |
| Tennessee | $2,410 | Arlington | $2,880 | Severe storms and tornadoes |
| Texas | $3,726 | Houston | $4,973 | Fires, tornadoes, flooding and hurricanes |
Billion-dollar disasters
With rising occurrences of extreme heat, droughts are becoming more frequent and lasting longer. For example, residents in Fallon, Nevada, have endured multiple prolonged drought events, averaging a duration of 184.5 weeks. Data from the National Integrated Drought Information System indicated that as of early June 2024, 36.9 percent of the U.S. was under moderate drought conditions, while 8.1 percent faced droughts categorized as exceptional — the most severe rating, indicative of water emergencies and extensive crop and pasture losses.
Homeowners should be mindful of the impacts of extreme heat and droughts, which can severely damage homes and are typically not covered by standard homeowners insurance policies.
Droughts can cause the soil beneath a home to dry and contract, potentially leading to foundation issues. Uneven settling of the foundation can result in cracks, leaks, and structural damage to both interior and exterior walls, as well as misalignment of doors and windows. These problems can accumulate significant repair costs. However, damage caused by natural soil settling and expansion is typically excluded from coverage under homeowners insurance policies.
| Event type | Total number of events | Total cost | Average cost per year | Average deaths per year |
|---|---|---|---|---|
| Flood | 44 | $200.2B | $4.6B | 17 |
| Severe storm | 186 | $463.2B | $10.5B | 48 |
| Tropical cyclone | 62 | $1,411.2B | $32.1B | 157 |
| Wildfire | 22 | $145.7B | $3.3B | 12 |
Droughts: the forgotten natural disaster
When homeowners purchase insurance, they transfer the financial risk of potential losses to an insurance company rather than assuming the risk themselves. Insurance companies, in turn, mitigate this risk by purchasing reinsurance — insurance for insurers. In the event of a catastrophic loss, insurance companies can file claims with reinsurers to cover excess losses, safeguarding their financial stability and long-term profitability. This system ensures that policyholders are protected from insolvency risks.
However, the impact of natural disasters on home insurance rates is significant. With climate change leading to more frequent and severe catastrophic events, reinsurance companies have raised their rates substantially for insurance companies. These increased costs are passed down to policyholders. Since insurance operates as a shared risk pool, all policyholders bear the collective claims and profitability outcomes of their insurer. When an insurer faces substantial payouts due to natural disasters in specific regions, it can lead to higher insurance premiums for all policyholders, particularly those residing in areas prone to future catastrophic losses.
How natural disasters impact your home insurance rate
When a catastrophic disaster strikes, it sets off a financial ripple effect that affects transportation, housing, materials, and labor costs for homeowners and residents in the vicinity. Disasters often deplete local resources and materials, necessitating the transportation of building supplies, contractors, and workers to the affected area. This diversion creates shortages of builders and materials in areas not directly affected by the disaster.
As a result, the principles of supply and demand come into play, leading to significant price increases for housing, goods, and services. This inflationary trend raises repair and reconstruction costs across the board, impacting everyone, even those who did not sustain direct damage from the disaster.
Price surge: Catastrophic disasters drive up rebuilding costs
A catastrophic disaster triggers a financial ripple effect that affects transportation, housing, materials, and labor costs for homeowners and residents in the surrounding areas. Local resources and materials are frequently depleted by such disasters, prompting the transportation of building supplies, contractors, and other construction workers to the affected site. This diversion of resources creates shortages of builders and materials in unaffected locations. As a consequence, the principles of supply and demand come into play, driving up prices sharply for shelter, goods, and services. This inflationary pressure results in increased costs for repairs and reconstruction efforts, impacting the entire community, not just those directly affected by the disaster.
Does homeowners insurance cover natural disasters?
A homeowners insurance policy offers coverage for specific perils or events that can vary significantly based on your state, insurance provider, and policy type. Here are some common natural disasters and related perils typically covered:
- Fire and smoke: Most fires, including electrical and cooking fires, are covered, except for intentionally set fires. Homes in wildfire-prone areas might require separate coverage or endorsements, or have specific deductibles.
- Windstorm and hail: Damage from tornadoes, derechos, gales, and hurricanes is generally covered. Some regions prone to tornadoes and hurricanes may have separate deductibles or require additional endorsements.
- Lightning: Damage caused by lightning strikes, including fires and electrical surges, is typically covered by standard home policies.
- Weight of ice, snow, or sleet: Damage from snowstorms and blizzards, where accumulation causes roof or structure damage, is typically covered.
- Volcanic eruption: Homes in areas with active volcanoes may have coverage for damage from ash, dust, lava flow, fire, and explosions resulting from volcanic activity.
Coverage specifics can vary, so it’s important to review your policy to understand what perils are covered, any exclusions, and deductible requirements.
How to insure excluded natural disasters
Usually, homes represent one of the most substantial financial investments for individuals. Even for homeowners residing in high-risk areas, safeguarding their assets is possible by obtaining endorsements to modify their policies or acquiring separate coverage for most natural disaster perils.
For example, if adding an earthquake endorsement to an existing policy isn’t feasible, many insurers offer standalone earthquake insurance. In California, homeowners may also opt for coverage through the California Earthquake Authority (CEA).
Flood insurance, typically purchased separately, is available through private providers or the National Flood Insurance Program (NFIP). Homeowners seeking coverage for windstorms or wildfires can often add endorsements to their policies or purchase specific windstorm or wildfire insurance through state programs. It’s advisable to consult with your insurance agent to ensure your homeowners policy includes appropriate coverage for natural disasters relevant to your area’s climate.
Drastic rating and policy changes in response to extreme weather
The frequency and cost of natural disasters have prompted insurance companies to reassess their underwriting and rating practices for extreme weather events. In 2023, the National Association of Insurance Commissioners published its Climate Risk Disclosure Survey findings, revealing that several major insurers are responding to shifts in extreme weather patterns by raising rates, increasing deductibles, excluding certain perils from coverage, and adjusting their risk models. These changes are beginning to unfold across the industry.
Bankrate’s data indicates that several home insurers have recently transitioned to a multi-peril rating system aimed at more accurately assessing the risks associated with various perils. While this adjustment has led to reduced premiums for some policyholders, it has resulted in significant rate hikes for others.
An illustrative case is State Farm’s recent decision to rescind nonrenewals for approximately 30,000 home policies in California. Instead, these policies will be renewed with the exclusion of wildfire coverage, necessitating homeowners to secure wildfire insurance through the California FAIR Plan.
As extreme weather patterns continue to evolve, homeowners should anticipate further adjustments to their insurance coverage.
Highest-risk areas for natural disasters
Looking at any map of natural disasters in the U.S. reveals their potential to impact any region. Extreme weather events occur throughout the year in varying forms. Winter weather typically spans from October 15 to April 15, transitioning into spring fire seasons marked by dry foliage and warmer temperatures lasting from May to August, though it can start as early as February and peak in late summer. Tornado and hurricane seasons dominate spring and summer, with tornadoes most active between May and July and hurricanes causing flooding from June through November’s end.
Earthquakes and tsunamis, however, defy seasonal predictability. These events can occur at any time of year without warning. According to the United States Geological Survey, historical earthquake records dating back to 1900 suggest an average of about 16 earthquakes annually, some of which lasting over 20 seconds can trigger tsunamis. The map below delineates the high-risk regions across the U.S. susceptible to various natural disasters.
States that are most impacted by flood costs
A study published in Nature Climate Change highlights that climate change is intensifying flood risks, exacerbated by population growth. By 2050, the northeast could face increased flooding, while Texas and Florida may see a 50 percent rise in flood exposure. Currently, the top five states most affected by flooding include:
- Florida
- Texas
- Louisiana
- New Jersey
- California
In hurricane-prone regions, homeowners primarily seek flood and wind coverage. Many obtain flood insurance through the NFIP, and additional windstorm insurance may be necessary if their standard home policy excludes wind damage. State-backed insurers like Louisiana Citizens Property Insurance Corporation and Texas Windstorm Insurance Association offer wind damage coverage, often considered as “insurance of last resort” due to higher premiums compared to those available in less risky areas through private insurers.
States that are most impacted by wildfire damage costs
Wildfires can rapidly spread from remote forests to densely populated areas, with human activities causing approximately 85 percent of these destructive fires through both deliberate and accidental actions. While homeowners insurance typically covers fire as a standard peril, residents in wildfire-prone zones often need to secure additional wildfire coverage.
Currently, the top five states most affected by wildfire losses are:
- California
- Texas
- Colorado
- Arizona
- Idaho
Dr. Lori Moore-Merrell, U.S. Fire Administrator, emphasizes the importance of individual homeowners and residents taking proactive measures to protect their homes from fires. This includes removing or reducing flammable fuels around homes, using fire-resistant materials for roofs, vents, windows, and fences to minimize ignition risks from airborne embers, and actively participating in fire prevention efforts within communities near forested areas.
Methodology
Bankrate leverages Quadrant Information Services to analyze insurance rates as of June 2024 for all ZIP codes and carriers across all 50 states and Washington, D.C. The quoted rates are based on married male and female homeowners with a clean claim history, good credit, and the following coverage limits:
- Coverage A, Dwelling: $300,000
- Coverage B, Other Structures: $30,000
- Coverage C, Personal Property: $150,000
- Coverage D, Loss of Use: $60,000
- Coverage E, Liability: $500,000
- Coverage F, Medical Payments: $1,000
The homeowners have a $1,000 deductible, a $500 hail deductible, and a 2 percent hurricane deductible (or the closest available deductible amounts) where separate deductibles apply.
These rates are for comparison purposes only. Your individual quotes will vary.