Forget high rates. Meet real estate’s hidden deal killer

While everyone’s fixated on high interest rates, another line item in the budget is quietly sinking home sales—and most buyers never see it coming.

“Insurance has killed more of my deals than interest rates ever have,” says Denny Anderson of Built to Buy in Florida, the most expensive state for insurance averaging $8,471 a year. Anderson recently met a homeowner whose insurance spiked from $1,400 to $2,000 per month, forcing him to sell.

Home insurance premiums, long an afterthought, have reached a record high of $209 per month—up 8.7% since last year and nearly 80% since 2020, according to Intercontinental Exchange. Property insurance now eats up 10% of the average monthly mortgage payment, but can reach 25% of housing costs in some areas. That’s a sizable chunk that could go even higher any moment an insurance drone whizzes by to inspect your roof.

This surge in premiums follows a rising tide of extreme weather, from hurricanes to wildfires. The US also overhauled its flood maps, which means more homes with federally backed mortgages now must add a separate flood insurance policy. In certain areas like California, an even bigger problem looms: availability. As Sam Alishahi, an independent insurance broker in Beverly Hills, explains, “The question buyers and homeowners ask has shifted from ‘Why is my premium up?’ to ‘Will anyone cover me at all?’”

How to rein in insurance—and what to do if you’re dropped

Homeowners facing high insurance costs do have options. The big one? Skip the auto-renew, shop around, and switch to a carrier offering lower rates with similar terms. Those who insurance-hopped cut premiums by $440 on average, a record 6.6% drop, while people who stayed put got hit with a 10.4% hike. Also ask insurers which upgrades can lower premiums, such as storm shutters, impact glass, roof straps, and leak alarms.

Another way to trim premiums is to raise your deductible—which isn’t as risky as you might think. “Many people carry low deductibles, but you don’t need to carry insurance on a loss that you can cover on your own,” points out Matt Hylland at Arnold and Mote Wealth Management. “If you have a $2,000 deductible on your house and an emergency fund in excess of that, you can feel comfortable increasing that deductible.”

If you need to file a claim, make sure it’s worth it—not just in terms of paperwork. Jennifer Taylor at Claim Ready got dropped after filing her third small claim in three years—for getting locked out of her car. “I was shocked,” she says. Taylor ended up with better coverage elsewhere, but learned that minor claims can still cost you when insurers review your history.

Bottom line: Factor insurance into your original number-crunching, and treat it like a moving target.