Homeowners Insurance Costs Are Rising: What Homebuyers Need to Know About Affordability and Mortgage Payments
When homebuyers think about affordability, the conversation usually starts with home prices and mortgage rates. Those are certainly two of the biggest factors determining how much house someone can afford, but they aren't the only expenses that matter.
One housing cost receiving considerably more attention is homeowners insurance.
Homeowners insurance premiums have risen significantly in recent years, adding another expense for buyers already balancing mortgage rates, home prices, property taxes, closing costs and other expenses associated with purchasing a home.
According to data from the National Association of Insurance Commissioners, homeowners insurance costs increased faster than inflation between 2018 and 2024. Premiums rose across every major region of the United States, though the increases varied considerably depending on location.
For anyone planning to buy a home, these increases highlight an important lesson:
The price of a home doesn't determine whether it's affordable. The total monthly housing payment does.
Understanding homeowners insurance—and getting a realistic estimate before purchasing a property—has become an increasingly important part of preparing for homeownership.
How Much Have Homeowners Insurance Costs Increased?
Homeowners insurance premiums have moved higher throughout the country.
Between 2018 and 2024, premiums increased approximately:
18% in the Northeast
25% in the Midwest
27% in the Southeast
43% in the West
Nationally, premiums have continued to increase more recently as well.
Those numbers are especially important because homeowners insurance isn't generally an optional expense for someone financing a home.
Mortgage lenders typically require borrowers to maintain adequate homeowners insurance on the property securing their loan. That means increasing insurance premiums can directly affect the amount of money a buyer needs to budget each month.
Why Are Homeowners Insurance Premiums Increasing?
There isn't one single explanation for higher homeowners insurance premiums.
Insurance companies consider numerous factors when determining rates, and conditions vary dramatically by state and even by individual property.
However, several broader trends have contributed to rising costs.
Higher Construction and Repair Costs
If a home is damaged, an insurance company may need to pay to repair or rebuild part—or potentially all—of the property.
Construction costs have increased substantially over the past several years.
Labor, lumber, roofing, siding, electrical components, plumbing materials, appliances and many other building products cost more than they once did.
When the potential cost of repairing or rebuilding homes increases, insurers may need to collect higher premiums to account for that additional risk.
This is one reason insurance costs can increase even for homeowners who have never filed a claim.
Severe Weather and Natural Disasters
Weather-related risks are another major factor affecting insurance markets.
Hurricanes, wildfires, flooding, hailstorms, tornadoes and other severe weather events can result in enormous losses for insurance companies.
Risk varies considerably by region.
A home in Florida may face different insurance considerations than a home in New Jersey. A property near the Jersey Shore may have different risks than a home farther inland. A Pennsylvania property may face another set of considerations altogether.
This is why buyers shouldn't assume insurance will cost approximately the same simply because two homes have similar purchase prices.
Rising Home Values
Higher home values can also influence insurance costs.
It's important to understand that homeowners insurance isn't based solely on a home's market value. Insurers are particularly concerned with what it could cost to repair or rebuild the property.
As replacement costs rise, the amount of coverage necessary to adequately insure a home can increase as well.
Reinsurance and Insurance Market Conditions
Insurance companies purchase their own insurance, known as reinsurance, to help protect themselves against major losses.
When the cost of reinsurance rises, those expenses can eventually contribute to higher premiums for consumers.
In certain higher-risk markets, some insurance companies have also reduced coverage, tightened underwriting requirements or stopped writing certain types of new policies.
All of these factors can influence both the cost and availability of homeowners insurance.
Why Homeowners Insurance Matters When Getting a Mortgage
Here's where insurance and mortgage qualification intersect.
When you're buying a home with financing, your mortgage payment is only one part of the monthly housing expense a lender considers.
Depending on the property and loan, the total monthly housing obligation can include:
Mortgage principal
Mortgage interest
Property taxes
Homeowners insurance
Mortgage insurance, if applicable
Homeowners association dues, if applicable
Certain other property-related obligations
This is commonly referred to as the PITI payment when discussing principal, interest, taxes and insurance.
A home might appear affordable when you look only at principal and interest. Once taxes and homeowners insurance are included, the actual monthly payment can look very different.
That's why accurate insurance estimates have become increasingly important during the mortgage pre-approval and home-buying process.
Homeowners Insurance Can Affect How Much House You Qualify For
This is something homebuyers don't always realize.
Higher homeowners insurance premiums don't just mean you'll spend more money after purchasing the home. They can potentially affect your mortgage qualification.
Mortgage lenders evaluate a borrower's debt-to-income ratio when determining qualification.
Your debt-to-income ratio compares certain monthly debt obligations with qualifying monthly income.
Because homeowners insurance is generally included in the housing payment used for mortgage qualification, a higher insurance premium can increase your housing expense and potentially reduce the mortgage amount for which you qualify.
Consider a simplified example.
Suppose two homes have the same purchase price and similar property taxes.
If insurance on one property costs $150 per month while insurance on the other costs $400 per month, that's a $250 monthly difference before considering anything else.
Over a year, that's $3,000.
More importantly from a mortgage qualification standpoint, that additional $250 becomes part of the monthly housing expense.
That can matter when a borrower is already near the maximum debt-to-income ratio permitted by a particular loan program.
Don't Assume Insurance Costs Based on the Home You're Leaving
Current homeowners sometimes make another mistake when purchasing their next home: they assume their new homeowners insurance will be similar to what they're paying now.
That isn't necessarily true.
Your existing home may have been insured for years with the same carrier. Your new property may have a different age, roof, construction type, location, replacement cost, flood exposure or claims history.
The insurance market itself may also have changed significantly since you bought your current home.
If you purchased your existing property five or ten years ago, your experience obtaining insurance today may be quite different.
Insurance Should Be Investigated Before You're Too Far Into the Purchase
Homebuyers frequently wait until late in the mortgage process to obtain homeowners insurance.
Years ago, that may have been less concerning in many markets.
Today, I think buyers should pay attention to insurance earlier.
You don't necessarily need to obtain quotes on every property you view, but once you're seriously considering a home—and certainly once you're under contract—it's smart to determine what the property will actually cost to insure.
This is especially important if the home has characteristics that could affect insurance availability or price.
Those could include:
An older roof
Coastal location
Flood-zone considerations
Older electrical systems
Previous insurance claims
A swimming pool
Certain property conditions
Older construction
Unique building materials
Significant replacement costs
The objective is to avoid discovering late in the transaction that the insurance expense is dramatically different from what you expected.
Why This Matters for New Jersey Homebuyers
New Jersey buyers already need to pay close attention to the total monthly housing payment because property taxes can vary significantly from one municipality to another.
Homeowners insurance adds another variable.
A buyer searching for a home in South Jersey, for example, might compare properties in Williamstown, Washington Township, Sewell, Blackwood, Cherry Hill and surrounding communities.
Two homes with similar asking prices can produce substantially different monthly payments once property taxes and insurance are factored into the equation.
Move closer to the Jersey Shore and insurance considerations may change again.
Buyers considering homes in Wildwood, Cape May and other coastal areas may need to investigate flood zones, wind exposure and property-specific insurance requirements.
The lesson is simple:
Don't compare New Jersey homes using purchase price alone.
Compare the complete estimated monthly payment.
Florida Homebuyers Need to Pay Particular Attention to Insurance
Insurance has become an especially important affordability consideration for Florida homebuyers.
Florida's exposure to hurricanes and other weather-related risks has created unique challenges in the state's property insurance market.
Someone relocating from New Jersey or Pennsylvania to Florida may look at a home's purchase price and assume the monthly payment will be straightforward.
But insurance can materially change the calculation.
Florida buyers may also encounter additional considerations depending on the property, including flood insurance, condominium association costs, homeowners association fees and other property-specific expenses.
This doesn't mean someone shouldn't buy a home in Florida.
It means insurance needs to be part of the financial analysis from the beginning rather than an afterthought.
If you're comparing several Florida properties, obtaining realistic insurance estimates can help you understand which property actually fits your budget.
Pennsylvania and Delaware Buyers Shouldn't Ignore Insurance Either
Although some states receive more attention because of major weather risks, rising homeowners insurance costs are a national issue.
Pennsylvania and Delaware homebuyers should also account for insurance when comparing properties and calculating affordability.
Different locations, property types and home characteristics can produce different insurance premiums even within the same state.
Delaware buyers considering coastal communities may face very different insurance considerations than someone purchasing farther inland.
Pennsylvania buyers may find that the age and condition of the property play an important role in obtaining coverage and determining premiums.
Again, the asking price alone doesn't tell you what owning the property will cost each month.
What About Flood Insurance?
Homeowners insurance and flood insurance are not the same thing.
A standard homeowners insurance policy generally does not cover flooding from rising water.
Depending on the property's location and the mortgage being used, separate flood insurance may be required.
Even when it isn't required by the lender, some homeowners choose to purchase flood coverage based on their individual risk and circumstances.
For homebuyers, this creates another reason to research a property carefully.
If flood insurance is required, that premium needs to be included when calculating the cost of owning the home.
A property that initially looks affordable could have a very different monthly expense once all required insurance is included.
Property Taxes and Insurance Can Change After You Buy
Homebuyers should also understand that principal and interest on a fixed-rate mortgage may remain consistent, but the total monthly payment isn't necessarily fixed forever.
Property taxes can change.
Homeowners insurance premiums can change.
Flood insurance can change.
HOA fees can change.
If your mortgage payment includes an escrow account for taxes and insurance, your lender generally collects money each month and uses those funds to pay the applicable bills.
When taxes or insurance premiums increase, the amount collected through escrow may need to increase as well.
This is why homeowners sometimes see their total mortgage payment rise even though they have a fixed interest rate.
The mortgage rate didn't change.
The expenses associated with owning and insuring the property did.
Why Shopping for Homeowners Insurance Can Matter
Mortgage shopping gets plenty of attention, but buyers should consider shopping for homeowners insurance as well.
Premiums can vary among insurance companies.
Coverage can vary too.
The cheapest policy isn't automatically the best policy, and buyers should make sure they're comparing appropriate coverage rather than simply choosing the lowest premium.
An experienced insurance professional can explain coverage options and help you understand what is—and isn't—covered.
From the mortgage side, what matters is obtaining an accurate premium so we can calculate the housing payment correctly.
Home Affordability Is More Than the Interest Rate
Mortgage rates dominate housing headlines.
When rates fall, buyers hear that affordability is improving. When rates rise, buyers hear that affordability is getting worse.
That's true to an extent, but it's incomplete.
Actual home affordability is influenced by several factors at the same time:
Home prices matter.
Mortgage rates matter.
Property taxes matter.
Homeowners insurance matters.
Income matters.
Down payment matters.
Mortgage insurance can matter.
HOA fees can matter.
And the specific property you choose matters.
That's why two borrowers buying homes for exactly the same price can have very different monthly housing expenses.
A Lower-Priced Home Isn't Always the Lower-Payment Home
This is another important point for buyers comparing properties.
Imagine you're considering two homes.
Home A costs less but has higher property taxes and a significantly higher homeowners insurance premium.
Home B costs somewhat more but has lower taxes and insurance.
It's possible for the difference in monthly payment to be much smaller than the difference in purchase price suggests.
Depending on the numbers, the more expensive home could even produce a surprisingly competitive monthly payment.
That's why I encourage buyers to send me properties they're seriously considering.
We can run estimated payment scenarios using the actual taxes and a realistic insurance estimate rather than guessing based solely on purchase price.
Get Pre-Approved Using Realistic Numbers
A mortgage pre-approval is one of the best ways to understand your home-buying power before making an offer.
But a pre-approval is most useful when the assumptions behind it are realistic.
If insurance is estimated too low, the projected payment may also be too low.
That's particularly important when a borrower is shopping near the upper end of their price range.
As you narrow your home search, we can update the numbers based on specific properties.
You may discover that you're comfortable spending more in one community because taxes and insurance are lower.
Or you may decide to reduce the purchase price in another location because the non-mortgage expenses are higher.
That's exactly what the mortgage planning process should help you determine.
Don't Let Rising Insurance Costs Catch You by Surprise
Higher homeowners insurance costs are another challenge facing today's buyers, but they shouldn't prevent someone from exploring homeownership.
They simply make preparation more important.
Before purchasing a home, understand the complete financial picture.
Know your estimated principal and interest payment.
Review the property taxes.
Get a realistic homeowners insurance quote.
Determine whether flood insurance may be necessary.
Account for HOA or condominium fees when applicable.
Then evaluate the total monthly housing expense.
That's a much better measure of affordability than looking at the listing price or mortgage rate alone.
Planning to Buy a Home? Start With the Complete Payment
Whether you're buying your first home, moving into a larger property, downsizing, purchasing a vacation home or relocating to another state, today's housing market requires buyers to look at the entire cost of homeownership.
Rising homeowners insurance premiums are a perfect example of why.
A mortgage rate can tell you what borrowing money costs.
A home's price tells you what the seller is asking.
Neither one, by itself, tells you what you'll actually spend each month to own the home.
That's where good mortgage planning becomes valuable.
If you're considering buying a home in New Jersey, Pennsylvania, Delaware or Florida, I can help you review your mortgage options, down-payment scenarios, estimated closing costs and projected monthly payment before you start making offers.
And once you've identified a specific property, we can incorporate the home's actual property taxes and a realistic insurance estimate to give you a much clearer picture of affordability.
The objective isn't simply to determine the maximum mortgage you can qualify for.
It's to help you understand what you're buying, what it may cost each month, and whether that payment fits comfortably into your financial plans.
Ready to find out what your home-buying numbers look like?
Contact Mortgage Mike to discuss your options and get started with a mortgage pre-approval.
Michael DeSantoMortgage Loan OfficerCrossCountry MortgageNMLS #1766709Licensed in New Jersey, Pennsylvania, Delaware and Florida
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