Growing property risk is casting a shadow over the American dream of homeownership. Insurance products such as standard homeowner’s insurance, flood insurance, fire insurance, and other specialized lines are a financial first line of defense, protecting homeowners and the financial institutions who lend to them from these mounting risks. But the rising cost of insurance is threatening the ability of would-be buyers to attain homeownership and, increasingly, the ability of existing homeowners to sustain it. And rising costs are a growing concern for entities who hold and manage mortgage credit risk, including lenders and servicers and the federally backed agencies who guarantee mortgage securities.

Why This Matters

Homeownership has long been the primary pathway for building financial security and opportunity in the United States, yet it is becoming less affordable. Insurance adds another cost pressure. If households cannot afford to adequately protect their most significant asset, the consequences extend beyond individual families to communities and, more broadly, to the future of housing and the finance system that it depends upon.

Using a novel loan-level database that captures insurance coverage and costs along with key sociodemographic and geographic information of homeowners with a mortgage, this report explores three questions:

• How can we meaningfully measure insurance cost burden?
• Where and for whom are insurance cost burdens greatest?
• What factors relate to high insurance cost burdens?

Key Takeaways

In this report, we define insurance cost burden as monthly insurance premiums for all coverage types shown in the data (e.g., homeowner’s, flood, wind, and earthquake insurance) as a share of monthly household income at loan origination. Whether these premium levels represent burdens depends upon the household’s overall housing and debt burdens, but this metric is useful for comparison and benchmarking as a stand-alone indicator and reveals the following findings:

• Insurance cost burdens have risen. Measured as a share of income at origination, insurance premiums rose from 1.87 percent on loans made in 2018 to 2.27 percent on those originated in 2024. The share of new mortgages where insurance premiums exceeded 3 percent increased from 10.5 percent in 2018 to 16.2 percent in 2024.
• Where you live increasingly matters. Borrowers in high-hazard-risk areas face burdens nearly a full percentage point higher than borrowers in low-risk areas, and this gap widened between 2018 and 2024.
• Low-income borrowers face a double burden. Low-income borrowers pay higher insurance rates per dollar of home value—borrowers earning above 120 percent of the area median income pay approximately $2.10 less per $1,000 of home value than borrowers earning below 50 percent of the area median income—and they have less income to absorb those higher costs.
• Insurance cost burdens are highest for borrowers facing mortgage barriers. Borrowers with low credit scores, high debt-to-income ratios, and lower incomes, as well as Black borrowers and Federal Housing Administration borrowers, are more likely than other borrowers to be insurance cost burdened.

Our findings underscore that insurance cost burden is not simply related to hazard risk. It reflects a complex interaction of borrower financial characteristics, property and neighborhood attributes, and geographic market conditions. Through these interactions, the burden falls most heavily on low-income households, borrowers with constrained financial capacity, and communities exposed to hazards.