While the rising cost of auto insurance is pushing up the official inflation rate, there is a stealth insurance cost that isn’t showing up in the consumer price index – homeowners insurance. Along with high mortgage rates and record home prices, soaring insurance rates are just one more thing putting pressure on the cost of home ownership.
Insurance costs are up approximately 20% over the last two years and projected to rise another 6% in 2024. The cost of insuring the average home rose to $1,905 in 2023 from $1,272 in 2019. That’s a 50% increase according to a recent note from Bloomberg Intelligence.
This cost isn’t showing up in the official inflation data. The CPI instead measures tenants and household insurance which only looks at renters insurance. That didn’t rise as fast over the last few years. And if CPI took homeowners insurance into account they would have pushed the measure up about 0.7 percentage points to 4.11% in 2023, according to a recent estimate.
Much of the increase in cost of homeownership insurance is due to climate change. The number of very costly extreme weather events in the US has been growing. In 2023, 28 disasters caused at least $1 billion in damages. a record going back to 1980. Home insurance costs range widely, with the states with the highest costs being prone to extreme weather events like hurricanes, wildfires, and tornadoes.
The 2024 hurricane season is set to be a doozy. Effects of those storms will show up in premiums 12 to 18 months later.
