The cost of home insurance is soaring—far exceeding the rate of inflation. As a result, millions of homeowners are cutting back on coverage or going without it, putting their finances at risk. The Federal Reserve estimates that seven percent of American homeowners didn’t have insurance last year; 43 percent of that group said they couldn’t afford a policy.

It’s easy to see why: The average annual premium for a policy for someone with mid-range credit and a house that would cost $350,000 to rebuild is now $3,303, according to a recent report from the Consumer Federation of America (CFA).

While inflation rose 11 percent from 2021 to 2024, the average homeowners insurance premium increased by $648, a 24-percent rise, CFA’s report noted. In some states, the rate hikes in 2024 were significantly higher: Utah (59 percent), Illinois (50 percent), Arizona (48 percent), and Pennsylvania (44 percent).

The insurance industry attributes skyrocketing premiums to more frequent climate-related disasters, rising material costs, high labor costs, and increased litigation.

“We understand how unsettling it is to see insurance rates go up,” said Loretta Worters with the Insurance Information Institute, an industry trade group. “Insurance rates have to reflect the real risk of loss in order to ensure that insurers can meet their promise to pay claims when disaster strikes.”

Consumer advocates say corporate greed and lax oversight at the state level are also to blame.

“Insurers are making homeownership unsustainable or unattainable for many families rather than working with communities and consumers in the critical effort to lower risk, improve resilience, and increase access to reasonably priced coverage,” said Doug Heller, director of insurance at CFA. “The insurance companies have become climate opportunists, using the real crisis of increasing disaster risk to bully regulators into allowing unjustified rate hikes that pad profits and unfair underwriting rules that slice and dice and price too many Americans out of the market.”

Carmen Balber, executive director at Consumer Watchdog, a Los Angeles-based national consumer advocacy group, sees another alarming and “outrageous” trend: Insurance companies are “lowballing” claims resulting from the California wildfires, often paying out as little as 20 or 30 percent  of what homeowners believe they are owed.

“Consumers who had recently seen massive rate increases also learned that their insurance company was trying not to pay them for their full losses in the L.A. fires,” Balber told Checkbook. “And State Farm is the number one culprit, really lowballing those claims, refusing to pay for testing, and then offering consumers $30,000 when their private estimate is $150,000.”

A Wildfire Survivor Shares Her Insurance Nightmare

Rosanna Valverde and her husband, Sam, are Pasadena homeowners who survived the January 2025 Eaton wildfire, which destroyed more than 9,000 buildings. They were lucky (if you can call it that) because their house did not burn. But it’s now filled with toxic chemicals left by smoke.

They feel “betrayed” and “mistreated” by State Farm, their insurance company, which they say refuses to pay to detoxify their house.

“I can’t believe that they can market themselves as ‘like a good neighbor.’ They’re the worst neighbor possible,” Valverde told Checkbook’s Consumerpedia podcast. “You pay for 30 years, and when you have something that’s no fault of your own, they will not live up to their promises.”

State Farm told the couple that their house had suffered only smoke damage, which could be wiped away and vacuumed. However, an independent inspector reported the house contains high levels of lead, arsenic, and nickel.

Rosanna and Sam have been staying with their son since the fire, because State Farm won’t pay to make their “toxic” house safe to live in. To do this, they were told, everything must be removed, cleaned off-site, then returned.

The attic insulation, carpets, and hardwood floors will go to the dump. Special paint will need to be applied to the sheetrock to lock in the heavy metals. The clothes can be cleaned. The upholstered furniture must be destroyed.

Estimated cost: $300,000. State Farm settled the claim for about $70,000.

“What am I supposed to do with that?” Valverde asked on our podcast. “You know, it’s not even enough to start.” To describe how State Farm treated her, she said, “Disrespectfully and dishonestly, like we’re stupid, and just dragging it on forever.”

Rosanna and Sam are considering suing State Farm, as others have done. They expect it could take a year or more to move back into their house.

“We’ve been demoralized, defeated. We have panic attacks. We can’t sleep. I’ve lost a lot of weight,” she said. “We both have had to have medication for the panic attacks. I cannot believe these people [State Farm] sleep at night.”

Checkbook sent State Farm multiple emails asking for comment, but the company did not respond. 

Complaints about delayed and underpaid insurance claims are not limited to California’s wildfire victims. Victims of hurricanes and severe thunderstorms in other parts of the country report similar payment problems.

“We see this time and again where the insurers who sell us this product with a contract to pay come up with excuses not to pay,” Heller said.

How to Save Money

If you want to save a substantial amount of money—hundreds or even thousands of dollars annually—shop around for a better rate every few years. 

Checkbook’s researchers collected annual premiums for sample policyholders in seven major metro areas and found that many homeowners can save $1,000 or more a year by switching to lower-cost insurers—some will save more than $1,500. Condo owners and renters will also save money by collecting prices from several insurers.

You can shop around online or use an independent agent who sells coverage from multiple insurance companies.

You don’t have to wait until the end of your policy term to shop around and switch companies. If you change insurers, your old company must reimburse you for the unused portion of any payments you’ve made. 

Other ways to save:

Raise your deductible. With a higher deductible, you get a discount for agreeing to pay more out-of-pocket before insurance kicks in. Increasing your deductible from $1,000 to $2,500 saves an average of about 10 to 15 percent a year.

Bundle your policies. Many insurance companies offer small discounts to customers who insure both their homes and cars with them. But keep in mind that such discounts are usually small and won’t make a high-priced insurer a good deal.

Home safety. Insurance companies give discounts or charge lower rates to policyholders who take steps to reduce the risk of fires and burglaries. Installing deadbolt locks, smoke detectors, and a home security system monitored by a central system usually will save you about five percent. A fire-suppression sprinkler system could result in an additional five to 15 percent premium reduction, according to the U.S. Fire Administration.

Some companies offer small discounts for seniors, members of affinity groups such as AARP, and nonsmokers. You should also be rewarded for choosing paperless billing and paying by automatic withdrawal.

Watch Out for These Tricks and Traps

Some insurance companies are now offering cash-strapped homeowners “actual cash value” policies that are slightly cheaper but provide significantly less coverage than “replacement cost value” policies. It is crucial to understand the difference and know which coverage you are buying. 

With actual cash value coverage, the insurance company’s payment for damage to your home or personal property is based on its depreciated value at the time of the loss. As a result, the payout might not be enough to fully repair or rebuild your house or replace all your damaged personal property. 

With replacement cost value coverage, the insurance company will pay to repair or rebuild your damaged property (minus the deductible) using materials of like kind and quality and replace your belongings with similar or like items at current market prices, up to the limits stated in the policy.

Many homeowners make the smart choice and buy replacement value insurance. But you also must buy enough coverage. Insurance companies now use formulas to estimate homes’ replacement costs, but Consumer Watchdog’s Barber said these algorithms can underestimate the actual cost. Ultimately, homeowners are responsible for maintaining sufficient coverage.

Many victims of the wildfires in California have been shocked to learn that they were insured for only up to $500,000, when the rebuilding costs are expected to exceed $750,000, Balber said.

To protect yourself, confirm that the insurance company has accurate information about your home, including details about the building materials used and any upgrades atypical of other homes in your neighborhood.

Click here for Checkbook’s full report on home insurance.