"From inflation and natural disasters to higher repair costs and fewer insurers in the market, rising personal insurance rates in 2025 are leaving many homeowners and drivers asking the same question: why is coverage suddenly so expensive?"
"Wondering why your insurance rates keep climbing? Learn the top factors driving premium hikes in 2025 and how to prepare for your next renewal."
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What’s Happening with Personal Insurance? Here’s What You Should Know
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Inflation hasn’t just impacted household budgets – it’s also affected insurance rates. Other factors, like natural disasters and long auto repair wait times, are also putting pressure on the personal insurance market. If you’re planning to buy coverage soon or your auto or homeowners policy will be up for renewal, this report will prepare you for the current state of personal insurance in 2025.
Homeowners Insurance According to the Consumer Federation of America, average homeowners insurance rates increased by 24% between 2021 and 2024. That adds up to a total price hike of $21 billion for American homeowners. That’s just the national average. Some states saw bigger increases. Utah had the steepest price hike at 59%, followed by Illinois at 50% and Arizona at 48%. There’s also variation within states. For example, KSTP says some homeowners in Minnesota have seen their rates double or even triple. Meanwhile, CalMatters says homeowners in California could face extra fees to FAIR Plan claims from the Los Angeles wildfires.
Insurance Options Are Decreasing In 2025, homeowners insurance prices are continuing to rise. Rates for homes under $1 million in value were up by 3.3% in the second quarter, while rates for homes over $1 million in value were up by 6.7%. Source: MarketScout A large rate hike isn’t the only unpleasant surprise facing homeowners: many are finding out that their insurer won’t renew their policy. In some cases, insurers are leaving entire states. Some states have seen insurers go bankrupt, exit the market, or reduce their presence. Bankrate says it’s been particularly difficult to find affordable homeowners insurance in Florida and California after multiple insurers have stopped offering coverage. Florida has lost more than 30 insurance companies, including 11 that went through liquidation in 2024. In California, Insurance Business says American National, State Farm, Allstate and Farmers all paused new policies or implanted strict caps. Even insurers that remain in a state may decide to non-renew individual policies. NPR says that insurers have been using aerial images from drones and satellites to determine whether they want to renew homeowners insurance coverage. In one example, CBS News says an insurer decided not to renew homeowners insurance for a woman in California after drone footage showed an increase in hazards, clutter and unsanitary conditions. The homeowner says she was in the middle of remodeling, hence the mess.
In 2025, homeowners insurance prices are continuing to rise. Rates for homes under $1 million in value were up by 3.3% in the second quarter, while rates for homes over $1 million in value were up by 6.7%.
Auto Insurance Auto insurance prices have increased by 36% since 2020, according to an ABC News analysis of BLS data in 2024. Since then, prices have continued to climb. A report from the Lending Tree found that average rates increased by 12% in 2023, 16.5% in 2024, and 7.5% in 2025. Although the 2025 rate increase is much more moderate than the 2024 increase, this may not provide much relief for drivers due to the cumulative effect of premium hikes.
he Rising Need for Uninsured Motorist Coverage Tight budgets and rising auto insurance rates are causing some drivers to go without coverage. According to the Insurance Information Institute, the percent of uninsured drivers has been increased since 2019, when 11.6% of drivers lacked insurance. In 2023, 15.4% of drivers lacked insurance. Additionally, 18% of drivers were underinsured, and nearly one in five injury accidents involve losses that exceed the at-fault driver’s insurance limits. Since state law typically requires insurance, drivers who go without coverage risk expensive fines, losing their licenses, and having their cars impounded. If you are hit by an uninsured motorist, you can sue the driver. However, if the driver doesn’t have any money, it will be difficult to recover anything even if you win. To protect drivers against this risk, many states recommend purchasing uninsured and underinsured motorist coverage. As the number of uninsured motorists grows, the need for this coverage will increase.
Three Factors Behind the Current Market Conditions If you’re in the insurance business, your goal is to collect enough in premiums to pay all your claims. If premiums exceed claims you achieve an underwriting profit. In recent years, insurers have been experiencing underwriting losses. In fact, S&P Global says the U.S. property and casualty market experienced a net underwriting loss of more than $20 billion in both 2022 and 2023. Underwriting performance improved in 2024, but insurers are still grappling with many of the factors behind the losses seen in 2023 and 2022, specifically rising costs, reinsurance rate hikes and natural disasters.
1 | Rising Construction and Repair Costs The increase in construction and repair costs is impacting both consumers and insurance companies. U.S. inflation surged up to 9.1% in June 2022, as measured by the U.S. Consumer Price Index. Higher prices have impacted everything from cars to building materials, with a noticeable impact on insurance claims costs. Inflation has also triggered demand for higher wages, and rising labor costs adds to claims costs. At the same time, insurers have dealt with supply chain issues and material shortages, further driving cost increases. However, it’s not just recent economic factors that are leading to higher auto repair costs. According to Kelley Blue Book, repair costs have increased by 36% since 2018. This is largely due to the increasingly sophisticated – and therefore expensive – technology in modern cars. Many car parts contain sensors. Even minor collisions can damage those sensors, requiring pricey repairs. Consumer Reports says it should cost about $300 to $500 to replace a standard side mirror, but mirrors with Advanced Driver Assistance Systems (ADAS) can cost up to $2,500 to replace. Bumpers, windshields, headlights, and other parts are also much more expensive to repair. Add it all up, the cost difference is significant. LexisNexis says auto claims severity has surged since 2020, noting a 47% increase in material damage.
2 | Higher Reinsurance Costs Insurers use reinsurance to protect themselves against larger-than-expected losses by transferring some of their risk – reinsurance is basically insurance for insurers. At the reinsurance renewals on January 1, 2023, reinsurance rates increased by 20% to 60% in most property markets, according to Fitch Ratings. Since then, reinsurance renewals have not been so drastic. Nevertheless, insurers are paying significantly more for reinsurance, and passing those added costs onto policyholders.
3 | Natural Disasters There’s a reason why California and Florida are seeing some of worst problems with rising rates and nonrenewals: these states are especially prone to natural disasters.
Data from the National Oceanic and Atmospheric Administration (NOAA) shows that the number of natural disasters causing at least $1 billion in damage has surged in recent years, even when adjusting for inflation. Per year, there were an average of:
• 3.3 events between 1980 and 1989
• 5.7 events between 1990 and 1999
• 6.7 events between 2000 and 2009
• 13.1 events between 2010 and 2019
• 23 events between 2020 and 2024
In 2024, there were 27 weather and climate disasters with losses exceeding $1 billion. NOAA is no longer tracking billion-dollar disasters as of 2025. However, if current trends continue, we can expect a large number of costly weather and climate events. The wildfires that struck the Los Angeles area in January are estimated to have caused between $76 billion and $131 billion in property and capital losses, including $45 billion in insured losses, according to the UCLA Anderson School of Management.
An insurance market can be hard or soft. Soft markets lead to good insurance buying conditions, while hard markets can make it difficult to find affordable coverage. Cycles are influenced by insurers’ profitability, which is determined by losses paid out and return on investment income. When the insurance market’s losses are higher than expected year after year, a hard market can result. These cycles can have a big impact on your home and auto policies.
Hard Insurance Market (stormy buying conditions) Insurers Become Highly Selective Insurers May NOT Want Your Business It Can Be Hard to Get Approved Rates Go Up Coverage Limits Go Down Your Policies May Not Be Renewed Soft Insurance Market (good buying conditions) Insurers Compete for Your Business Everybody Wants to Insure You It’s Easy to Get Approved Rates Go Down Coverage Limits Go Up Policies Are Automatically Renewed Strategy & Advanced Planning are Essential It’s Smart to Shop Multiple Carriers RIGHTSURE Will Help You Get the Right Coverage at a Good Price Strategy & Planning Are Less Urgent It’s Still Smart to Shop Multiple Carriers RIGHTSURE Can Get You the Most Coverage for the Least Money
How to Prepare for Your Insurance Renewal While rate increases are never welcome news, they’re not quite as painful when you know they are coming, and you have time to prepare. Here are some suggestions to help you navigate:
1. Start planning early.
Take a close look at your budget and reach out to your RightSure agent so we have time to creatively explore your options.
2. Call us to brainstorm potential solutions.
If you need to keep your monthly premium within a certain budget, let us know. We can collaborate with you to find ways to save money. Sometimes that might involve adjusting your deductible, your coverage limits or your coverage types. We can help you weigh the pros and cons of every option.
3. Sit back and let RATEGuardTM work for you.
We automatically shop your coverage with 40+ carriers to guarantee you receive the most competitive insurance rate available. This means you never have to waste your time calling around – our cutting edge technology does all the legwork for you.
4. Maintain and protect your property.
Insurers prefer to provide coverage for properties that are well-maintained. Keep good records of major updates such as roofs, windows, and HVAC systems. Be aware of risks in your area and demonstrate that you’ve taken steps to protect your property against common exposures such as wildfire and flood.
5. Leverage discounts.
Your RightSure team will search for every discount available. Let us know of your association memberships and potential good student discounts for teen drivers. Also, if you have multiple policies you may be eligible for bundling discounts.
RightSure’s Famously Friendly Humans Are Here for You! Now, more than ever, it’s important to have an experienced insurance partner working for you. When you reach out to RightSure, you will be helped by famously-friendly humans who go out of their way to make sure your experience is always top notch. We are proud of our people and our female-led executive team – and our results speak for themselves: We are North America’s most awarded insurance firm!