Higher Prices, Less Coverage: The New Normal for Homeowners Insurance?

For years, homeowners insurance felt like a boring bill you paid and (hopefully) never used.

Since 2020, homeowners insurance has begun to feel more like a moving target: higher premiums, tougher underwriting, bigger deductibles, and more claims that close with little or no payout.

Insurers are facing more threats than inflation; they’re paying more to repair and replace homes and facing more claims from severe weather damage.

But insurance is still a profitable business. As the American Association for Justice (AAJ) reports, property and casualty insurers made a record $169 billion in profit in 2024 – even as they raised prices and begged state governments to raise prices further.

So what comes next? Are homeowners resigned to pay higher rates for less coverage every year until they die?

New York Times Highlights “Home Insurance Crunch” of 2025

According to a December 2025 article in The New York Times, climate change is driving dramatic increases in homeowners insurance premiums across the United States, forcing insurers to reduce coverage and increase premiums.

The New York Times collected stories from ordinary homeowners nationwide struggling to manage higher premiums. Some homeowners have seen premiums double in the last few years. Others are facing 20 to 50% higher premiums year-over-year.

They’re calling it the “home insurance crunch” of 2025, with homeowners paying higher rates for less coverage. Some of the conclusions from the home insurance crunch include:

• Areas prone to climate-driven risks, including wildfires, hurricanes, floods, and severe storms, are facing the highest rises in premiums. In these areas, damaging storms are becoming more frequent and more costly.
• In some cases, insurers are refusing to renew policies in high-risk zones. As seen in California, insurers sometimes cancel policies in areas viewed as being excessively risky.
• Insurers are considering more than just recent disasters. They’re making strategic decisions based on risk assessment and reinsurance pricing. Rising cost of reinsurance (insurance for insurance companies), for example, is forcing insurers to make tough decisions.

Ultimately, this will lead to a system where traditional insurance is unaffordable and hard to obtain without state-backed programs or market reforms – especially for homeowners in high-risk areas with increasing rates of climate-driven disasters.

What “Less Coverage” Looks Like

Insurers are charging higher premiums, but they’re also providing less coverage.

Sure, homeowners insurance may technically cover many of the same things it did a few years ago. Realistically, however, many insurers are being stricter with underwriting and claims handling.

Some of the ways insurers are reducing coverage include:

• Higher deductibles. Higher premiums are easy to spot. Many insurers, however, are quietly shifting costs to homeowners by increasing deductibles. The deductible is the amount you pay for each claim before insurance covers the rest. Instead of paying a one-time flat deductible of $2,500 for a hurricane claim, for example, many insurers now use named storm deductibles for hurricane claims. You might pay 5% to 10% of your home value, for example, for the privilege of making an insurance claim on your own home. One 2025 study found the average deductible increased 24.5% from 2024 to 2025, with the highest increases in high-risk states like Florida and Texas.
• More exclusions and tighter wording. Some insurance companies are also passing costs to homeowners by increasing the number of exclusions and tightening the wording. It may be harder to get compensation for smoke damage claims, for example. Many homeowners find they’re being forced to pay out of pocket for things that would normally be covered by an ordinary homeowners insurance policy.

Homeowners Have Fewer Choices

Moreover, today’s homeowners have fewer choices.

Private insurers have pulled out of some areas entirely, cancelling coverage and failing to renew existing plans. Homeowners are forced to buy from their state’s insurer of last resort (or go without coverage entirely).

State Farm stopped accepting new property insurance applications in parts of California in 2023, for example, citing catastrophe exposure, construction costs, and reinsurance pressures.

When private insurers pull out, the government steps in. California’s FAIR Plan, for example, spreads a pool of homeowners among the state’s insurance companies. As of September 2025, the FAIR Plan has 645,987 policies in force statewide – a 39% increase since September 2024 and a 169% increase since September 2021.

Insurers Are Denying More Claims

Some statistics also suggest insurers are denying more claims than before.

According to a report by the Houston Chronicle, for example, 47% of Texas homeowners insurance claims closed without payment in 2024, with denials tied to rising deductibles and tighter coverage.

A separate report by MarketWatch, meanwhile, found people were paying a lot for insurance and still found it was “not enough to protect them from disaster.” In other words, homeowners who are doing nothing wrong – buying coverage and paying premiums regularly for years without issue – are finding themselves effectively uninsured when disaster strikes.

5 Things Homeowners Can Do Right Now

As an ordinary homeowner, it’s easy to feel helpless with rising rates and increased denials.

You can’t control storms or the climate. But you can control some things, including:

1. Know your deductible in dollars and percentage points. You should know the exact amount you would pay today if a storm or fire destroyed your home. Know your deductible in dollars and percentage points. Your deductible can be high, but it should still be an amount you can afford to pay.
2. Update coverage limits to avoid being underinsured. It costs more to repair and replace a home today than it did a few years ago. Update your coverage limits to avoid being underinsured. Years of inflation have left many homeowners without enough coverage.
3. Document your home before a loss. Keep a home inventory. Do a quick video walkthrough of your home and everything inside of it periodically.
4. Get independent estimates. Don’t rely on one insurer-written scope when repair costs are volatile. Insurers may use the cheapest estimate, leaving you with substandard repairs or significant out-of-pocket expenses.
5. Push back early if the scope is missing items. Your insurer’s first estimate often “sets the anchor” in negotiations. Don’t let them set it too low. Push back early to ensure everything that should be covered is covered. Contact a public adjuster for expert help if needed.

Premiums Expected to Rise 16% Between 2026 and 2027

According to the Consumer Federation of America, the typical homeowners insurance premium rose $650 between 2021 and 2024, or around 24%. That same report found insurance was rising twice as fast as inflation over that same period.

Experts don’t expect relief in 2026. Insurance premiums are expected to continue rising: one late 2025 report found premiums were projected to rise 16% over the next two years.

Struggling with an expensive claim, denied claim, or other insurance claim problem? ClaimsMate’s experts can help. Don’t let insurers take advantage. Schedule a free consultation today.