Rising property insurance premiums are quietly becoming one of the biggest threats to housing affordability in the United States. Evidence shows that current premiums are outpacing what household incomes can absorb, leaving more homeowners burdened by insurance nationally and in the country’s most disaster-exposed markets.
Low-income households, first-time homebuyers, and communities and households of color in high-risk regions are bearing a disproportionate share of these costs, which are projected to keep climbing over the next decade. Households can’t take on a mortgage without insurance coverage, and dropping coverage later could mean one bad storm wiping out a lifetime of home equity.
In this article, we highlight three consumer trends in markets facing greater disaster risk and rising property insurance costs:
- More homeowners are using state-run fair access to insurance requirements (FAIR) plans
- More homeowners are going without coverage
- Homeowners are taking on higher deductibles relative to their coverage
In each of these cases, homeowners are taking on more risk partially because property insurance markets have concentrated, making the available options less affordable.
1. With fewer private options, more households are relying on state FAIR plans
As homes in high-risk markets become costlier to insure, private insurers are raising prices, and many are pulling back entirely. In many cases, this pullback stems from state insurance commissioners not approving the price increases insurance companies believe are necessary to cover their costs. The market has grown more concentrated as a result. The share of homeowners in high-risk areas covered by the five largest insurers rose from 38.2 percent in 2018 to 41.4 percent in 2024, with the increase sharpest for Latino borrowers.
With fewer private insurers in these markets, more homeowners are turning to state-provided FAIR plans, which are designed to fill the gap when private coverage isn’t available. In high-risk areas, FAIR plan use rose from 2.1 percent of borrowers in 2018 to 10.5 percent in 2024. For Latino borrowers, the shift has been especially steep: 15.8 percent relied on a FAIR plan in 2024, more than four times the 2018 rate.
This growing reliance on the public backstop is a warning sign, not a solution. FAIR plans keep coverage available, but they offer limited protection at a higher cost than standard policies. Homeowners with FAIR plans often pay more for less.
Rising FAIR plan dependence signals a deeper strain on insurance affordability and availability in high-risk communities. For Latino homeowners, who are disproportionately exposed to climate risk and often have less financial cushion to start, growing reliance on FAIR plans could make sustaining homeownership and building wealth more difficult as climate risks worsen.
2. More homeowners are forgoing insurance
Faced with rising premiums, a growing share of homeowners are opting out of coverage entirely. Among all homeowners, the uninsurance rate ticked up from 12.4 percent in 2018 to 12.9 percent in 2024. The increase has been steeper for Latino homeowners, whose uninsurance rate rose from 16.8 percent to 18.2 percent over the same period. Without insurance, these households have no financial protection against property damage.
In every major market we analyzed, Latino homeowners were more likely than owners overall to forgo property insurance. This gap was especially pronounced in Houston, San Antonio, Dallas, and the Washington, DC, metropolitan area.
3. To manage rising costs, homeowners are taking on higher deductibles
A homeowner’s insurance deductible determines how much they will pay out of pocket before coverage kicks in, making the deductible an important aspect of insurance affordability. But deductible amounts tell only part of the story. Homeowners with a higher deductible-to-coverage ratio—the deductible amount per $1,000 of coverage—absorb a larger share of any losses before insurance benefits take effect.
By that measure, homeowners in high-risk areas are increasingly vulnerable financially. Deductible-to-coverage ratios rose for all racial and ethnic groups between 2021 and 2024, with the increase most pronounced for Latino borrowers. Often, homeowners deliberately make this trade-off to keep monthly premiums manageable as coverage gets more expensive.
In this case, more manageable premiums also entail a wider gap between having insurance and being protected by it. A higher deductible-to-coverage ratio means a bigger bill is due before coverage begins. In high-risk areas more susceptible to larger disaster losses, homeowners are increasingly choosing to self-insure more risk, even as the odds of needing that coverage are rising.
What comes next?
With households adapting to accelerating property insurance costs and insurers retreating from high-risk markets, policymakers and regulators need a shared road map for the future. Right now, responses are scattered across federal agencies, state regulators, and insurers, with no unifying framework.
Closing that gap will require joint efforts that align government action, rely on evidence-based solutions, and build on areas of emerging consensus. These steps could include the following:
- Creating better public data and greater transparency in homeowner’s insurance pricing, similar to the disclosure for mortgage markets in the Home Mortgage Disclosure Act. State regulators, coordinated through the National Association of Insurance Commissioners, recently launched a nationwide data call collecting zip code–level insurance data, a model worth building on and expanding.
- Establishing stronger public-private partnerships and an improved reinsurance market to expand coverage in the highest-cost markets and absorb more risk at a lower cost.
- Investing in resilience and postdisaster recovery to minimize catastrophic costs that make coverage unaffordable in the first place.
The evidence base for action is growing. It’s time to build the road map to match it.
Let’s help communities build more secure, hopeful futures.
Today’s complex challenges demand smarter solutions. Urban brings decades of expertise to understanding the forces shaping people’s lives and the systems that support them. With rigorous analysis and hands-on guidance, we help leaders across the country design, test, and scale solutions that build pathways for greater opportunity.
Your support makes this possible.
