As experts tally losses from the record-breaking 2024 Atlantic hurricane season, which brought a total of 18 named storms and the earliest Category 5 hurricane to date, some estimates suggest that its total damages and economic losses could reach $500 billion. The unprecedented season included five hurricanes that made U.S. landfall, with estimated losses between $25.5 billion and $68.5 billion, Insurance Journal reported; one of those storms, Hurricane Milton, caused an estimated $50 billion in private insured losses.
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“The insurance industry has faced another costly year in terms of weather-related events and natural disasters,” said Bill Gatewood, Corporate Senior Vice President, National Personal Insurance Practice Leader, Burns & Wilcox, Detroit/Farmington Hills, Michigan. “The frequency and severity of natural disasters will be on the minds of everyone in the industry.”
If they did not know it previously, many homeowners now know how important it is to have the correct type of insurance in place, whether it is Homeowners Insurance and wind coverage, or Flood Insurance even if you are not technically in a ‘flood zone.’
Nationwide, Homeowners Insurance premiums rose an average of 11.3% in 2023 and almost double that amount in states like Texas and Arizona, according to S&P Global Market Intelligence. In Colorado, Homeowners Insurance rates surged more than 50% between 2020 and 2023 due in part to wildfire risk, rising home values and the growing cost of construction.
“Homeowners have definitely been impacted in different ways throughout the country,” said Anella Niewenhous, Associate Vice President, Regional Practice Group Leader, Personal Insurance, Burns & Wilcox, Morehead City, North Carolina. “If they did not know it previously, many homeowners now know how important it is to have the correct type of insurance in place, whether it is Homeowners Insurance and wind coverage, or Flood Insurance even if you are not technically in a ‘flood zone.’”
Some carriers reducing capacity or exiting disaster-prone states
According to Niewenhous, the 2024 hurricane season brought “devastating impacts up and down the East Coast, in the Gulf region, and in places that we would not normally see it.” One of 2024’s most notable storms was Hurricane Helene, which made landfall in late September and caused significant destruction, including an estimated $53 billion in damages in North Carolina, NC Newsline reported.
“Hurricane Helene did not take the normal path,” Niewenhous said. “Who would have thought a hurricane would hit the mountains of North Carolina and eastern Tennessee? It goes to show that storms are not only impacting coastal regions anymore. Whether it is hurricane, wildfires, or conductive storms, the whole country could be considered a catastrophe zone.”
Whether it is hurricane, wildfires, or conductive storms, the whole country could be considered a catastrophe zone.
In addition to rising premiums, some homeowners have been met with fewer choices for Homeowners Insurance over the past year as carriers have exited the marketplace in flood- and wildfire-prone locations — a crisis that is now affecting a growing number of U.S. homeowners and even impacting the real estate market in multiple states, CNBC reported in July.
“That does narrow the playing field for homeowners, because when a big mainstream carrier pulls out of a state, that leaves a lot of individuals without coverage that will have to be replaced elsewhere,” Niewenhous said, adding that it is more common for carriers to pull back on certain lines of business that are no longer profitable versus leaving a state completely.
Insurance carriers are increasingly focused on concentration of risk, Gatewood said. “Carriers are going to make sure they do not write too much business in any one area — that would apply to Western states where wildfire is a big concern, all of our coastal states from a wind perspective, as well as the Midwest when it comes to convective storms,” he said. “There could be possible capacity issues in some parts of the country, or those parts of the country may be more pricey.”
Less drastic rate surges expected in 2025
According to the National Association of Insurance Commissioners, between 1980 and 2023, the U.S. averaged about 8.5 catastrophic events each year that generated at least $1 billion in insured losses; yet in 2023 alone, there were 28 such events. In 2024, there were 24 confirmed weather and climate events exceeding $1 billion in losses as of Nov. 1, according to the National Centers for Environmental Information.
“Increased frequency of these disasters is a continued headwind for the industry, and one that is creating a lot of uncertainty,” Gatewood said.
On the positive front, I think the industry is starting to get to more of a place of rate adequacy. I do not anticipate that we are going to continue to see large rate increases on the Homeowners Insurance front.
However, the drastic rate increases on Homeowners Insurance that have been seen in some areas are not likely to continue into 2025, Gatewood said.
“On the positive front, I think the industry is starting to get to more of a place of rate adequacy,” he said, adding that slowed-down inflation has also taken some pressure off the market. “I do not anticipate that we are going to continue to see large rate increases on the Homeowners Insurance front. We will see rate increases, but probably in the neighborhood of 10%, which is a little more normalized than what we have seen over the last several years, where it has been 30% or higher in different places around the country.”
Those “significant” rate hikes should not be the norm, he added. “The industry has become healthier in the last three years and so those very steep increases are going to become fewer and fewer and will be limited to the more severe hazard risks that are out there,” he said.
The Homeowners Insurance market is also seeing some new carriers enter the space, potentially offering more options for homeowners, depending on their location, Niewenhous said. “We may be moving into a new cycle of market emergence — where some are leaving, new ones are being created,” she said.
Knowing your policy when it matters most
Today’s market conditions make it even more important for homeowners to understand how their insurance policies would respond in the event of a loss. For example, roof damage on a Homeowners Insurance policy is often covered on an Actual Cash Value (ACV) basis versus a Replacement Cost Value (RCV) basis, which is a distinction some homeowners only learn when they are faced with a claim.
Now more than ever, homeowners need to talk with their insurance broker and really understand their policy.
“Now more than ever, homeowners need to talk with their insurance broker and really understand their policy,” Gatewood said. “There have been a lot of changes to deductibles, including wind/hail deductibles and water deductibles that are in addition to standard policy deductibles, and homeowners need to understand how that applies to their policy.”
If coverage is not what was expected, a sudden loss could be devastating, he said. “The price of insurance may appear steep to a homeowner, but the cost of funding an uncovered loss is even greater. You do not want to get hit with an unfunded loss that you have to pay out of your own pocket,” he said. “The more knowledgeable a homeowner is about their policy, the less likely they are to be surprised when they have a loss.”
The same guidance applies to Flood Insurance, which is not included in a standard Homeowners Insurance policy. This continues to be a common point of misunderstanding among homeowners, Niewenhous said. “The average, everyday individual may not know that their policy does not include Flood Insurance,” she said.
Proactive steps homeowners can take
Following the destruction caused by Hurricane Milton, which made landfall along Florida’s Gulf Coast in early October, a FEMA representative stressed the importance of rebuilding with mitigation in mind, Fox 4 News reported Nov. 21. This can include home elevations, retaining walls, and strengthening materials on windows and doors. Hurricane-rated impact-resistant glass, storm shutters, and water shutoff devices may also be recommended.
“Paying for things like that up front could really save you in the long run,” Niewenhous said.
For those in wildfire-prone areas, installing ember-resistant vents, clearing away trees and brush, cleaning out gutters, and creating a defensible space around the home are key mitigation steps, Gatewood said. “Risk mitigation is going to be important just to get insurance,” he said. “It is critical that homeowners take those actions. In severe brush areas, that can be the difference between being able to find insurance and not finding insurance.”
Roof maintenance is another increasingly common underwriting factor when seeking Homeowners Insurance. “Sometimes if the roof is too old, the insurance companies are not going to want to insure them,” Gatewood said. “Making sure that the roof is newer and taken care of is a very positive action that homeowners can take.”
Beyond these risk mitigation considerations, homeowners may also benefit from a shift in perspective regarding the intent of insurance. “Homeowners Insurance policies are meant to cover catastrophic losses — not small maintenance losses,” he said. “If you approach your Homeowners Insurance policy from that perspective, it keeps you from turning in very small claims that may get the attention of your insurance company, potentially putting your coverage in jeopardy. The policy is intended to cover catastrophic loss.”
