Homeowners are paying more for less insurance coverage, according to a new report, while some lenders report losing deals due to insurance issues.
“In today’s market, home insurance is no longer a checkbox at the end of the process,” says Ben Madick, CEO and co-founder of Matic, a digital insurance platform that issued the report late last week. “It’s a critical step that can make or break a loan, and mortgage leaders who get ahead of it are in a much better position to help their borrowers succeed.”
According to Matic’s data, the average home insurance premium for new policies rose from last year by 9.3% to $1,966 by the end of 2025’s first half. That follows an 18.8% increase from 2023 to 2024 and an 11.6% increase in the prior year.
While the rate of increases has slowed, these figures represent a stark contrast to the 3%-5% average premium increases that were the norm previously, the report notes.
Since 2022, premiums for new policies have increased 45%, while Coverage A — the part of homeowner's insurance that covers repairs or rebuilding of a house if it’s damaged — has grown by less than 12%. As a result, many homeowners are paying significantly more for proportionally less coverage, the report says.
“In some cases, homeowners are now spending more than half of their monthly mortgage payment on insurance and taxes,” says Madick. “An increasing number of people are finding that rising insurance costs are standing in the way of buying a home or making it harder to keep the one they have.”
The report attributes much of the market strain to climate volatility. While coastal regions have long contended with hurricanes and flooding, parts of the Midwest and Southeast that were once considered low-risk are now seeing an uptick in convective storms, which bring hail and tornados.
These weather events accounted for 70% of global insured losses in recent years and have driven double-digit premium increases in states like Colorado, Mississippi, and Texas, according to the report. Besides convective storms, wildfires and flooding have become increasingly prevalent, further driving insurance price hikes and availability challenges.
Cost-Shifting Also Increasing
At the same time, insurers are shifting more financial responsibility to homeowners. The report notes that the average homeowner’s insurance deductible has increased by nearly 25% year-over-year, and many insurance policies are now including separate, percentage-based deductibles for wind and hail damage.
“An increasing number of people are finding that rising insurance costs are standing in the way of buying a home or making it harder to keep the one they have.” —Ben Madick, CEO and Co-Founder, Matic
Rising deductibles are particularly prominent in high-risk areas like Florida and Texas, where the frequency of hurricanes and other severe weather is higher. And many policies that previously carried a flat deductible are now being written with separate percentage-based deductibles for wind and hail — often 1% to 5% of the home’s insured value, representing a much larger out-of-pocket cost for most homeowners.
This change is largely driven by the rising number and severity of wind and hail claims. Wind and hail damage accounted for 42% of all insured home losses between 2018 and 2022, making it the leading cause of home insurance claims during that period.
Roof age and condition have also become key pricing factors, with the premium gap between homes with newer and older roofs tripling since 2022.
Government Policies Contributing
Beyond climate-related factors, the report points to federal tariffs as another driver of rising insurance costs. With tariffs on copper, steel, and aluminum now in place or expected soon, builders are bracing for increased material prices that could raise replacement costs and, in turn, insurance premiums.
Rising premiums also impact lenders, the report points out, noting that two-thirds of the lenders surveyed by Matic report issues related to insurance either “frequently” or “somewhat frequently” over the past year.
Since home insurance is a requirement to obtain a mortgage, lenders are facing challenges with loan closings due to the difficulties surrounding coverage. Common problems include debt-to-income ratios becoming too high once the cost of insurance is factored in — and delays in closings due to the time it takes to secure adequate coverage.
In addition, 72% of lenders surveyed expressed being “very concerned” about how economic changes and uncertainty could continue to impact home insurance, and by extension, the mortgage process.
That underscores the importance for lenders to be proactive and involved in the insurance process, says the report, helping borrowers navigate these challenges to avoid delays and facilitate smoother closings.
