The home insurance crisis hits the heartland

• The struggle to get and keep home insurance has been plaguing areas prone to floods and wildfires.
• Severe thunderstorms are also hiking home insurance premiums across the Great Plains and Midwest.
• Most Americans can't get a mortgage without home insurance.

Homeowners who live far from California wildfires and coastal flooding are experiencing some of the largest spikes in insurance premiums.

While the average cost of home insurance is rising in nearly every ZIP code across America, new research shows that the biggest percentage increases between 2021 and 2024 were in Utah, Illinois, Arizona, Pennsylvania, and Nebraska.

"Premiums have been rising faster in Heartland states than coastal states," Douglas Heller, director of insurance at the Consumer Federation of America and coauthor of the research, told Business Insider.

The findings show that the home insurance affordability crisis extends far beyond Gulf Coast states prone to hurricanes and flooding or California towns vulnerable to wildfires — which often make the headlines. Extreme thunderstorms with wind, rain, and hail are also causing billions of dollars in losses in states between the slopes of the Rocky and Appalachian mountains.

The disasters, combined with inflation and the rising costs of rebuilding homes, are driving up premiums and forcing some insurance companies to scale back coverage in risky areas or drop customers altogether. The consequences could be significant because most Americans can't get a mortgage without home insurance, and areas deemed too risky to cover could see property values drop.

"This insurance crisis is not a coastal crisis," Heller said. "It's not a Republican or Democratic state crisis. It's touching every corner of the country. These dramatic rate hikes are making this critical tool of financial security inaccessible because it's too costly."

Why home insurance premiums are rising so quickly in many states

The Consumer Federation of America found that between 2021 and 2024, average home insurance premiums in Utah jumped 59% to nearly $1,800 a year. In Arizona, they rose 48% to more than $2,200 while Illinois saw a 50% spike to nearly $2,950. In Pennsylvania, average premiums rose 44% to nearly $2,000, and in Nebraska, they rose 35% to $5,127.

Florida has the highest premium in absolute dollars, averaging nearly $9,500 in 2024, but its average rates rose by a smaller percentage compared to some other parts of the country.

J.P. Morgan published a report on March 31 that similarly found states, including Colorado, Utah, Nebraska, Iowa, Minnesota, and Illinois, experienced the largest percentage increases in home insurance costs between 2019 and 2024.

Deadly thunderstorms with high-speed winds, rain, hail, and tornadoes — what scientists call "severe convective storms" — have ripped across a wide swath of the Midwest and the South this year. In 2020, thunderstorms caused more than $11 billion in damage after tearing through states including South Dakota, Nebraska, Illinois, and Indiana, according to a federal tally.

"In the last few years, those big losses happening in the Heartland are from severe convective storms, and those are the ones that are driving premium increases," Sarah Kapnick, global head of climate advisory at J.P Morgan who authorized its report, said.

Climate scientists have long warned that wildfires, drought, and hurricanes are becoming more frequent and destructive as the planet warms mostly due to carbon emissions from fossil fuels.

Kapnick said it's more challenging to determine the climate connection to the convective storms and future risks because they are more local. Climate models often don't capture weather events on such a granular scale.

Scientific research is starting to get stronger. Kapnick cited a study suggesting hailstones will get bigger due to climate change. However, research stops short of connecting historical changes in tornadoes to a warming world.

Kapnick said insurance premiums are also rising fast in Heartland states because their markets are less regulated compared to places like California, which limits how much insurers can hike rates. National insurers can pool risk across states and raise premiums in place with fewer cost restrictions.

The home insurance crisis is expected to worsen

Still, Heller said it's hard to capture the full causes and scale of the home insurance crisis because there isn't much publicly available data.

The average annual premiums in his report don't reflect what customers actually paid. His group purchased "test quotes" from Quadrant Information Services, which maintains an up-to-date database of rates and pricing algorithms from most of the nation's major insurance companies.

These test quotes are created by plugging a typical homeowner into pricing algorithms that insurance companies filed with state regulators between December 2021 and August 2024. Heller said all quotes in his report were based on a consumer with a mid-tier credit score and a home with a $350,000 replacement value.

The Treasury Department and the National Association of Insurance Commissioners in January published an analysis of 246 million insurance policies sold between 2018 through 2022 — the most comprehensive look to date. They found that homeowners who live in areas with the highest expected losses from climate-related disasters paid 82% more for insurance than those in areas with the lowest expected losses. Nonrenewal rates were also higher in the riskiest areas and insurance claims are frequent in regions affected by wildfires and severe convective storms.

But it's unclear whether that data collection will continue, Heller said. Meanwhile, the home insurance affordability crisis will likely get worse as the planet warms. Since 2013, the United States has recorded 178 billion-dollar disasters, five times the amount recorded in the 1980s. The rising disaster risks led some insurers to stop selling policies in parts of Florida and California, which will only get worse after wildfires decimated communities in Los Angeles in January.

The Treasury Department and NAIC didn't respond to a request for comment.

Kapnick said insurance companies and policymakers need to find ways to ensure properties are more resilient to extreme weather to reduce damages.

"One of the easiest indicators of expected loss is, how old is your roof? When was it last replaced?"

Kapnick said insurers could offer homeowners discounts if they invest in resilience and states can also fund such projects.

Do you have a story to share about home insurance? Contact this reporter at cboudreau@businessinsider.com.