The home insurance market in the United States showed signs of calming down in 2025 after years of sharp premium hikes, according to a recent report by insurtech company Matic. The average cost for a new home insurance policy rose by 8.5% compared to the previous year, a slower climb than the 18% jump seen in 2024. However, premiums remain high, now making up about 9% of a typical homeowner’s monthly mortgage payment.
Ben Madick, CEO and co-founder of Matic, said the market is stabilizing thanks to carriers finding better ways to price risk and calmer weather in the latter half of the year. “Carriers are back to rate adequacy, technology is helping them assess risk more accurately, and calmer weather gave the market a chance to steady,” he explained. Still, he warned that high costs persist and climate-related uncertainties will keep affecting prices into 2026.
Homeowners are now shouldering more of the financial load by accepting higher deductibles, which rose 22% in 2025. Insurers are also focusing more on property-specific details like the age of a roof when deciding premiums. To get a clearer picture of risk, companies are using new tools like AI-driven inspections, satellite images, and drones. These techniques help assess homes based on current conditions rather than general assumptions.
The report highlighted that insurance costs and availability continue to vary across regions. States like Colorado, Texas, and Georgia experienced steep premium increases, partly due to climate risks and local regulations. At the same time, more homeowners are getting multiple insurance quotes—up 78% from the low point in 2024—showing improved access overall.
High-risk areas are relying more on Excess & Surplus (E&S) markets, with California, Florida, and Texas seeing a rise in E&S policies. Matic noted that by the end of 2025, these policies made up 16% of their customers in those states, up from less than 2% in 2023.
The impact of rising insurance costs is also reaching the homebuying process. Higher premiums are pushing up debt-to-income ratios for borrowers, sometimes delaying home closings or preventing buyers from qualifying for loans. Madick pointed out, “Insurance is playing a much bigger role in housing outcomes than it did even a few years ago. Knowing the cost and coverage earlier in the process helps both borrowers and lenders.”
Looking ahead to 2026, Matic expects climate risks like severe storms, wildfires, and flooding to remain major factors in how insurers set prices and decide what risks to cover. Affordability and availability challenges will continue, especially in high-risk ZIP codes. Discussions around consumer protections and federal programs like the National Flood Insurance Program will also shape the market.
Technology will continue to change how people shop for insurance and how companies evaluate risk. Matic anticipates more use of AI in these areas and greater investment in risk reduction efforts, such as roof reinforcements and electrical system monitoring, to help lower future claims and losses.
Overall, while the home insurance market is starting to settle, homeowners and buyers should be prepared for ongoing challenges brought by climate risks and high costs in the coming year.