Luxury homeowners face surging insurance costs amid climate risks

Ryan Harper and his wife decided to sell their Santa Clarita, California mansion after their insurance premium nearly tripled. Due to an exodus of home insurers from the state, they were left with a costly state government insurance policy supplemented by a private one, totaling over $7,000 annually.

The Harpers listed their six-bedroom Spanish-style home for $1.25 million but received little interest due to its fire-prone label by the state. Insurance costs became a concern for potential buyers, leading the couple to reduce the price by $75,000 before removing it from the market. "To sell a home in California right now seems almost impossible," Harper stated. "The insurance market is crazy."

Insurance premiums have risen across the U.S., particularly affecting luxury real estate. Citizens Financial Group reported that premiums for mortgage loans over $1.5 million increased 130% between mid-2020 and mid-2024, while those for mortgages between $400,000 and $800,000 rose 12%.

Luxury homeowners face higher costs partly because their properties are often located in areas prone to climate disasters. Major insurance companies have retreated from such regions as disasters become more frequent and severe.

Losses from Hurricane Helene across the southeast have raised concerns about further premium hikes or insurer withdrawals from high-risk markets. Property damage estimates from Moody’s Analytics suggest losses could reach $26 billion.

"What I’m hearing companies saying is, I have less of an appetite for high-end homes," said Dale Porfilio of the Insurance Information Institute. He explained that insurers prefer spreading risk across multiple lower-value homes rather than insuring single high-value properties.

Paulette Koch of Corcoran Group noted rising premiums as part of living costs in areas like Palm Beach, Florida: "I’ve gotten calls where people are incredulous."

Years of inflation have compounded these issues as rebuilding costs rise alongside reinsurance policies. Eric Schuppenhauer observed that insurance factors for beach and second homes have increased significantly.

Robert Kerdasha of AssuredPartners remarked on increased exposure for insurers due to population shifts into flood- and fire-prone areas: "If you’re an insurance company, it feels like overnight your exposure has gone up threefold."

Sandra Beckett sold her historic West Palm Beach home due to rising insurance costs after finding only one willing insurer whose premium was set to exceed $8,000 this year: "It was scary to be honest," she said.

Some homeowners opt to self-insure or drop protection entirely if without a mortgage obligation since banks require coverage.

Katja Pekrun plans to pay off her Menlo Park home's mortgage quickly to avoid expected premium increases: "Then I might go without home insurance because it’s really too expensive," she commented.