Luxury Homes Face Exploding Insurance Premiums

Owners of lavish homes with coastal views and beach access are receiving something far less pleasant, but equally stunning: surging insurance premiums.

Home insurance premiums are soaring across the board on all property types in the United States, the Wall Street Journal reported. The premium jumps for luxury homes in disaster-prone areas, however, take the cake in the rate of increases they’re seeing.

Take Citizens Financial Group. From mid-2020 to mid-2024, insurance premiums rose 12 percent for mortgage loans ranging from $400,000 to $800,000. For mortgage loans of more than $1.5 million, however, insurance premiums jumped by 130 percent.

The old real estate adage of “location, location, location” plays a major role. Luxury homes often sit on the coasts of either side of the country, the same places where natural disasters are gaining in intensity and frequency. Hurricane Helene may have caused up to $26 billion in property damage, according to Moody’s Analytics.

In turn, insurance companies are fleeing states like Florida and California, or at least significantly reducing their presence. Insurers are also spreading their risk to a greater number of cheaper homes, leaving luxury homeowners with fewer — and costlier — insurance options.

“It’s totally insane,” a homeowner in Menlo Park said of the rising insurance costs.

Luxury homeowners who don’t want to deal with exploding insurance premiums have few alternatives. Self-insurance or no insurance at all are risky choices and not available to those who obtained a mortgage, as home insurance is a requirement for banks.

Luxury homeowners are finding common ground with the rest of those playing the housing market. State Farm, California’s largest home insurer, expects to cut 1 million policies by the end of 2028. State Farm insures one in five homes in the state, but projects its policies to fall below 2 million in the next few years.

Last year, State Farm announced it would stop accepting new insurance applications in California, as did Allstate. That’s left more homeowners relying on the last resort state’s insurer, the FAIR Plan.

— Holden Walter-Warner