Homeownership comes with many upfront costs, such as the down payment, closing fees, and taxes. Mortgage lenders also typically require homeowners’ insurance to cover any potential damages caused by weather, fire, accidents, or even vandalism.
However, home insurance premiums are on the rise, adding an extra cost to homeowners’ monthly bills.
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Climate change is exacerbating the frequency and intensity of weather patterns, and ultimately damaging a record number of homes. Housing damage drives up insurance costs, which are then passed on to homeowners through their monthly insurance premiums.
As home prices rise and mortgage rates remain elevated, monthly housing expenses for prospective home buyers and current homeowners continue to climb.
Berkshire Hathaway Home Services shares the actual costs of homeownership and why buyers may need to allocate more money than ever for home insurance.
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Berkshire Hathaway says home insurance premiums are on the rise nationwide
Though home insurance — often referred to as property and casualty (P&C) insurance — isn’t mandated by state or local governments, it is strongly recommended that home buyers purchase a policy.
Most mortgage lenders require home insurance to reduce risk and protect their property investments. Home repairs can be costly, and borrowers can easily fall behind in mortgage payments or default on loans if uninsured.
While home insurance is widely considered a necessity, rising monthly costs impact homeowners nationwide, making those in high-risk areas vulnerable to climate-related damage.
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According to a Progressive Insurance analysis, the average home insurance policy ranges from $1,191 to $2,136 annually, averaging $139 per month. However, the location, size, level of coverage, and property risk level determine the premium for each home
However, the Brookings Institute found that home insurance premiums increased 30% between 2020 and 2023 alone.
The Berkshire Hathaway Home Services blog notes that this trend will only worsen as time passes, stating, “Consumers can look to more of the same policy increases in 2025. With forecasts that mortgage interest rates will remain above 6%, private insurers are anticipating higher-cost policies, larger deductibles on premiums, and delayed closings.”
“And it’s probable that they’ll leave more high-risk areas of the country to be insured through federal programs.”
Berkshire Hathaway notes homeowners are strained by the rising cost and risk of insurance
In the U.S., the Southeast —particularly Florida— California, and Texas are the most vulnerable to weather-related housing damage. The increased cost of building materials and labor combined with increasingly devastating weather conditions creates considerable losses for home insurers.
Related: JP Morgan unveils major 2025 housing market prediction
Homeowners in high-risk states are finding that insurers are canceling their policies or increasing monthly premiums to levels they can no longer afford. The recent wildfires in California exposed the scale of devastation that can be caused by extreme weather and highlighted the need for home insurance coverage.
However, The Berkshire Hathaway Home Services blog underscores that these added costs put considerable financial strain on homeowners.
“Another impact extreme weather has had on homeowner’s insurance (HOI) is on mortgage loans. Lenders routinely require homeowner’s insurance and, in many cases, require that premiums be escrowed with mortgage payments. But that may be easier said than done. Because of significantly higher costs, HOI caused debt-to-income ratio imbalances for borrowers.”
Related: Veteran fund manager issues dire S&P 500 warning for 2025
