… not California or Florida! If you’re one of the billions of readers of this blog, you may know the answer, since I’ve discussed this before; however, if you’re one of the one or two people on earth who don’t read my articles, I’ll help you out. You’d think that the state with the most expensive home insurance probably has super high property values and natural disasters plowing through ten million-dollar homes, right? If you guessed Oklahoma, you’re correct!
In Oklahoma, the average homeowners insurance costs $5,858 per year, compared to $4,800 in Florida for the same amount of coverage. Florida has strict limits for the premiums for certain coverages; Oklahoma, however, regulates its insurance companies loosely. When it comes to regulating insurance providers, Oklahoma’s insurance commissioner Glen Mulready recently said “We’re not reviewing to see if they’re charging too much” and that insurance rates are set only “by market forces within a competitive free market.”
Are you thinking that Oklahoma’s tornadoes somehow cause more damage than anything in other states? If so, you are incorrect! Though these tornadoes cause catastrophic, horrifying losses, Arkansas suffers roughly the same amount of insurance loss as Oklahoma (around $6 billion annually), but has an average home insurance premium of about $2,000 less than Oklahoma. Additionally, Arkansas has 1 million fewer residents, which should put upward pressure on premiums relative to Oklahoma, not downward pressure.
One primary reason that Oklahoma’s home insurance rates are disproportionately high, according to the Yale Center for Environmental Communication, is that insurers cannot raise rates significantly in states that closely regulate their insurance markets, so they raise rates in states with few regulations, like Oklahoma.
As you can see, it’s difficult to compare premiums and coverages between states. For example, Hawai’i consistently ranks in the top five states for lowest homeowners insurance premiums, which seems absolutely wild, given that Hawai’i has the highest property values in the country. However, the typical standard insurance policy in Hawai’i does not cover damage due to wind or hurricanes, which is usually covered in standard policies in other states. Is this because wind storms don’t happen in Hawai’i? Nope! As you might have guessed, this is because wind damage is extremely common in Hawai’i.
The more common the type of damage, the less likely it is to be covered under a standard policy. Unpredictable, random events that only affect one or two homes tend to be cheaper to insure, like damage from a car crashing into your house. This is partially because there are so many people paying into the insurance pool who were not affected by the car crash. However, the more predictable and widespread the type of risk, the less insurable it is; widespread, frequent events expose the insurer to more risk.
For this reason, statistics on the number of homeowners insured in each state are a bit misleading. Each state’s most likely-to-occur weather event is also the least likely to have standard coverage. Does it matter if a lot of people have homeowners insurance in general if it doesn’t cover the most likely-to-occur catastrophes? Solid statistics on non-standard coverages are difficult to pin down, but if 85% of Hawaiian homeowners have insurance, this does not mean that anywhere close to 85% are protected when a hurricane rolls through.
So do most people go without insurance for the most likely-to-occur weather events in their state? Not exactly. Lenders do not allow borrowers to skimp on insurance, since the lender must protect their financial interest in the borrower’s property. It’s great if you feel comfortable not paying for insurance, but your lender doesn’t care about your feelings at all; they will force you to purchase it. If you refuse, they will charge you for extremely expensive “force-placed insurance” on your home. Force-placed insurance makes your lender the only beneficiary and cuts you out of the policy altogether except in one key respect, which is that you’ll be paying the premiums. 
It’s the people who own their homes outright who are more likely not to have insurance. Of course, these under-insured owners are not just doing it for the thrill; it’s difficult to afford insurance since rates have risen dramatically over the last five years. However, without the lending industry requiring all borrowers to have appropriate coverage, it’s likely that significantly fewer homeowners would be insured. This would mean that insurance would be even more expensive than it already is, since the number of owners paying into the insurance pool would be smaller.
Lenders act like a stabilizing force on rates and coverages. If lenders did not mandate appropriate coverage, the insurance industry might fall into a sort of death spiral where fewer people would pay into the insurance pool, causing rates to skyrocket, causing even fewer people to purchase insurance. If the lending industry didn’t indirectly regulate the home insurance industry, insurance would be even more unaffordable than it already is.
As insurance becomes more and more expensive, borrowers are spending a greater portion of their monthly incomes on it. This means that borrowers increasingly will have less to spend on the actual home purchase, and this may negatively affect home prices. The Lending Tree reports that homeowners insurance premiums have increased more than 40% nationally over the last six years, with some states seeing increases of 50-60%.
These skyrocketing rates are a rapidly growing problem that may have a massive effect on the lending industry, and on real estate in general. If no one can afford insurance, they won’t be able to afford much house, and the insurance industry, lending industry, and real estate industry will be affected. If you’ve read this far hoping for a solution, I’m flattered that you have vastly overestimated my abilities. Increasingly catastrophic natural disasters are difficult to insure without increasing premiums. Will home prices adjust to factor in these costs? Will the government increasingly step in as the insurer of last resort to stabilize the housing market? Will we start building houses underground? I’m just saying random things right now, which unfortunately is the only thing most of us can do when confronted with this complex topic.
https://yaleclimateconnections.org/2025/01/nobodys-insurance-rates-are-safe-from-climate-change/
https://www.lendingtree.com/insurance/state-of-home-insurance/#:~:text=Two%20states%20have%20an%20average,in%20natural%20disasters%20and%20inflation.
https://themortgagereports.com/118395/americas-hidden-housing-crisis
https://www.realtor.com/news/trends/home-insurance-coverage-rates-data/
https://mynews4.com/news/spotlight-on-america/dropping-home-insurance-more-americans-taking-risk-investment-unprotected-crisis-market-trends
https://www.usatoday.com/story/money/personalfinance/real-estate/2025/05/30/americans-go-without-home-insurance-costs-rising/83945277007/
https://www.nasdaq.com/articles/nearly-1-7-us-homes-are-uninsured-and-rate-even-higher-these-10-states
https://www.newsweek.com/home-insurance-storm-brewing-this-state-2048422
https://sourcenm.com/2024/08/21/fires-making-home-insurance-unaffordable-impossible-nm-lawmakers-say/
https://www.claimsjournal.com/news/national/2025/03/24/329621.htm
The State with the Most Expensive Home Insurance is…
