The cost of homeowners insurance outpaced inflation from 2000 to 2020, according to new research by the Insurance Research Council (IRC) – like Triple-I, an affiliate of The Institutes. During that period, IRC found the coverage to be most affordable in Utah and least affordable in Louisiana.

The IRC research brief, Homeowners Insurance Affordability: Countrywide Trends and State Comparisons, reports that the average homeowners insurance expenditure across the United States was $1,311 in 2020, while the median household income was $68,010 for the same year. The data excluded flood and earthquake insurance, neither of which is included in a standard homeowners policy.

Median household income was sourced from the U.S. Census Bureau, and average homeowners insurance expenditures data came from the National Association of Insurance Commissions (NAIC). Because the most recent NAIC data is from 2020, the affordability index does not reflect the inflation surge related to the COVID-19 pandemic and the war in Ukraine.

In Utah – the most affordable state – households spent only 0.92 percent of their income on homeowners insurance. Oregon, Wisconsin, Washington, and New Hampshire rounded out the states with the lowest expenditure-to-income ratios.

Catastrophes played a major role in states where homeowners insurance was least affordable. Louisiana topped the list, at 3.84 percent of income in 2020. The other least affordable states were Florida, Oklahoma, Mississippi, and Alabama.

Some of these higher costs are due to insurers facing obstacles related to fraud, excessive claims, and legal system abuse after catastrophic events. These cost drivers have led to less affordable coverage nationwide.

Additionally, certain areas are undergoing crises of both affordability and availability, as some insurers respond by reducing coverage or withdrawing from specific markets. The research brief notes that examining trends in cost drivers can reveal opportunities for improving both affordability and availability for all consumers.

Want to know more about the risk crisis and how insurers are working to address it? Check out Triple-I’s upcoming Town Hall, “Attacking the Risk Crisis,” which will be held Nov. 30 in Washington, D.C.

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