If you have asked why is home insurance so expensive, one recent research paper offers a useful map. It traces the rise in premiums to three pieces: what it costs to rebuild a home, how much insurers charge for risk, and a less visible layer, insurance for insurers, called reinsurance. This guide walks through what the researchers estimated, what changed in 2026, and what none of it can tell you.
Educational only, not insurance, legal, or financial advice. The main source is a working paper that has not been peer reviewed. Its estimates apply to the areas and methods described and are not national averages for every home.
Why is home insurance so expensive? The numbers
According to NBER Working Paper 32579 by Keys and Mulder (revised November 2025), the average home insurance premium for homeowners with a mortgage rose from about $1,690 in 2017 to about $2,750 in 2024. After adjusting for inflation, the authors put that increase at 28%. The authors infer premiums from mortgage escrow payments across more than 74 million premium records, so the figures describe that sample, not every policyholder.
How a premium is built, in the authors’ simplified model
The authors use a simple model in which premiums scale with three pieces: how likely a loss is, how costly it would be, and the extra cost an insurer faces to cover its biggest losses, which can hit many homes at once. It is a simplified formula, not an insurer’s real one, but it gives a map.
Piece one: rebuilding costs
Rebuilding a home costs more than it used to. The paper estimates that rising structure values explain about $385, or 35%, of the roughly $1,065 average premium increase from 2017 to 2024. Because policies typically adjust coverage limits for building costs at renewal, higher rebuilding costs tend to push premiums up.
Piece two: the price of risk
Across ZIP codes, places with more expected storm and fire losses tend to have higher premiums. What changed is how much. In 2017, a one-standard-deviation step up in expected disaster losses was associated with about $220 more per year. By 2024, the same step was associated with about $615 more. That rising price of risk accounts for roughly 20% of premium growth. Together with rebuilding costs, the two pieces explain a bit over half of the increase. The paper does not assign a cause to the rest, and this article will not guess.
Why is home insurance so expensive: the hidden layer, reinsurance
Reinsurance is insurance for insurers: an insurer passes part of its biggest shared risks, such as a storm hitting many homes, to another company. The chain looks like this: you pay your insurer, and your insurer pays a reinsurer. Insurers buy it because losses can be correlated. In the paper’s data, the premium-weighted average insurer wrote 74% of its homeowners premiums in a single state in 2014, which shows how concentrated an insurer’s exposure can be.
The paper reports that reinsurance prices, measured by Guy Carpenter’s index, more than doubled between 2017 and 2024.
To test whether that cost reached homeowners, the authors compared ZIP codes with similar expected losses but different degrees of correlated risk. They estimate the reinsurance price shock added about $425 a year to premiums in the most exposed tenth of ZIP codes and about $195 in the most exposed quarter, and explains about 45% of the rise in the price of risk in the top tenth.
These are not national averages. If your ZIP code is not among the most exposed, this study gives you no dollar estimate, though it shows how the mechanism works. The authors also found little evidence of pass-through in heavily regulated states.
What the insurers’ side looks like
A May 2026 AM Best special report says the average approved homeowners rate increase in the US was 8.3% in 2025, down 5.2 percentage points from a year earlier. AM Best credits improved results to aggressive rate increases and better pricing in the states with the weakest results. Approved increases are not what each household pays.
What reinsurance prices did in 2026
According to Guy Carpenter figures as reported by Insurance Business, global property catastrophe reinsurance pricing fell about 12% at the January 2026 renewals and about 16% after the mid-year renewals, the largest annual decline since the late 1990s. In Florida at the June 1 renewals, property catastrophe rates fell 15% to 20%. Gallagher Re puts first-half 2026 insured catastrophe losses at at least $46 billion, about 28% below the ten-year average. These are reinsurance rates, not homeowners premiums.
Why is home insurance so expensive: what can and cannot be said
- Documented: in the paper, reinsurance costs reached premiums in the most exposed areas from 2017 to 2024, and reinsurance prices have since fallen.
- Not established: how fast, or how much, that reaches your renewal. None of these sources answers that.
- Local rules matter: pricing is regulated state by state, so the same reinsurance change can look different from place to place.
The honest summary: the reinsurance layer is real, measurable, and moving, and what it means for you depends on where your home is. For a similar look at how prices and filings work for another type of policy, see why car insurance is so expensive, and browse more in Home & Housing.
Why is home insurance so expensive: what you can do
- Read your renewal notice. Check coverage limits, which are often adjusted for rebuilding costs.
- Compare equal coverage. When comparing quotes, compare the same amount of coverage, not only the lowest price.
- Ask your insurer or state insurance department. They can explain what drives your own renewal.
Frequently asked questions
What is reinsurance?
It is insurance that insurers buy to pass part of their largest shared risks, such as storms hitting many homes, to another company.
Will falling reinsurance prices lower my premium?
These sources cannot say. Reinsurance rates are not homeowners premiums, and how fast or how much any change reaches your renewal is not established.
Is this insurance advice?
No. This is general education. Brightward is independent and does not sell insurance.