Homeowner blindsided after insurance company issues sudden rate hike with no warning: 'I was surprised by the amount'
Insurance rates are on the rise, and the changing climate is to blame. As extreme weather events become more frequent or more intense (and sometimes both), insurance rates are skyrocketing to account for the growing risk.
Last year, Nebraska and other surrounding states saw several tornadoes resulting in billions of dollars in damage. This year, residents in Omaha are still paying the price — their home insurance rates are rising hundreds of dollars.
"I wasn't surprised that there was an increase. I was surprised by the amount of the increase," North Omaha resident Mary Butler told KETV.
On average, Nebraska residents are paying anywhere from $5,000 to $7,000 annually, per Bankrate data.
Insurance rates are rapidly becoming unsustainable. According to the U.S. Department of the Treasury, the "average homeowners insurance premiums per policy increased 8.7 percent faster than the rate of inflation in 2018-2022."
Homeowners are presented with a difficult choice: bank-breaking insurance premiums or no disaster coverage.
Some may not even have a choice — homeowners in high-risk regions can be dropped from their insurance plans without warning. Thousands of Californians were dropped from their policies after the wildfires, and North Carolinians lost coverage following Hurricane Helene.
As the effects of the changing climate are felt throughout the country, more and more homeowners are at risk of losing their coverage.
Some states are trying to introduce laws that will prevent insurers from canceling policies during times of catastrophe, like wildfires and floods.
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If you're struggling to afford your policy payment, know your options — shop around for insurance policies to find the most protection at the lowest cost.
You can also invest in home upgrades to help protect your home from extreme weather events.
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In this aerial view taken from a helicopter, a stucco villa owned by David Steiner is still standing among burned homes during the Palisades fire in Malibu, Los Angeles County, California, on January 9. In this aerial view taken from a helicopter, a stucco villa owned by David Steiner is still standing among burned homes during the Palisades fire in Malibu, Los Angeles County, California, on January 9. JOSH EDELSON/AFP via Getty Images On top of that, many wildfire survivors have found through the years that the FAIR Plan is particularly reluctant to cover smoke damage claims. In June 2017, the FAIR Plan revised its policy language to require "permanent physical damage" for smoke claims, a rewording that has since allowed the insurer to issue more and more denials. In 2022, an investigative hearing into the FAIR Plan found that the insurer's handling of smoke claims was less than adequate. 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To prevent another repeat of this, I would expect the study to require State Farm to report on its progress in addressing these issues, along with deadlines it must meet." The company finds itself under scrutiny for its recent request to hike its rates again, which State Farm says is necessary to stabilize its financial footing on the increasingly risky California market. In December 2023, State Farm received approval for a 20 percent increase in homeowners insurance premiums, which took effect in March 2024. Following the devastating wildfires earlier this year, it requested an emergency interim rate increase of 22 percent, which was reduced and approved as a 17 percent interim emergency rate increase effective June 1. "State Farm is still pursuing approval for the full 30 percent increase, with hearings scheduled for later this year," Merlin said. "I think State Farm will get another significant rate increase. The losses are much greater than what was originally determined. These fires were a historic event not seen since the last great urban fire in San Francisco more than a hundred years ago." He added: "The cost of these fires, as well as others that are happening at a much greater frequency, is causing significant losses and financial pressures. The fire peril losses in California have been off the charts for a decade. State Farm can certainly make a case for the need for higher rates." The question, Merlin said, is how to make sure coverage remains affordable for California homeowners. "Some may find that the cost of home ownership is simply too great, with insurance costs increasing significantly in such a short period," he added. "I don't see a short-term solution to this problem," Merlin said. "Rates and premiums will go up, but people might not be able to afford it. The long-term mitigation solutions will take far greater time to implement before those cost savings are realized. This is truly a crisis."
