Weather, inflation and rising construction costs are all contributing to sticker shock for the average Hoosier’s home insurance. Photo by Nick Youngston, Pix4free.

News Release

INDIANAPOLIS — Homeowners across Indiana are facing significant increases in home insurance premiums, reflecting a national trend driven by extreme weather events, inflation and rising construction costs.

In neighborhoods like Indianapolis’ historic Woodruff Place, residents are feeling the financial impact. One homeowner in the area saw her annual premium through State Farm climb 18% over the past year, from $2,046 to $2,415.

Since purchasing her 120-year-old home in 2018, her insurance cost has surged by more than 70%. The steep rise in premiums mirrors broader increases in property taxes, labor, and building materials.

Securing insurance for older homes has become increasingly difficult. Despite the premium hikes, some homeowners are hesitant to switch providers due to the limited availability of insurers willing to cover aging or historic properties.

A report released in January by the U.S. Department of the Treasury’s Federal Insurance Office underscored the growing challenge nationwide. Analyzing more than 246 million policies between 2018 and 2022, the report found home insurance premiums rose 8.7% faster than inflation. Homeowners in high-risk areas for climate disasters paid significantly more, on average, 82% higher than those in low-risk zones.

According to New York-based consumer finance firm Bankrate, Indiana homeowners pay an average of $1,756 annually to insure a $300,000 house. Though this rate is lower than neighboring states such as $3,501 in Kentucky, $2,351 in Michigan, and $2,174 in Illinois, it remains a growing burden for many. Only Ohio, at $1,406, has a lower average rate in the region.

Insurers have pointed to severe weather as a key factor behind the rising costs. In Illinois, State Farm has defended a proposed 27.2% rate hike, citing years of losses due to events like hailstorms. Kentucky’s exposure to multiple high-intensity tornadoes in recent years has further strained the insurance industry in the Midwest.

While home insurance typically covers damage from storms, hail and fire, it often excludes flooding, one of the most common and costly natural disasters in the U.S.

Insurance agents and industry experts report that conversations about home insurance are becoming more frequent and urgent among both consumers and professionals. In Indiana, rates have nearly tripled over the past two decades, and some in the industry fear this trajectory could continue unless broader changes are made.

The increase in premiums has been attributed to a combination of factors, including more frequent tornadoes, rising home values, supply chain disruptions and higher construction costs. Indiana typically experiences about 22 tornadoes annually, but the state saw 65 in 2023, 73 in 2024 and has already recorded 54 this year. A single storm in April produced 22 confirmed tornadoes across central Indiana, according to the National Weather Service.

While some industry leaders argue that insurance pricing is largely dictated by in-state losses, others say national trends, such as hurricanes in Florida or wildfires in California, can indirectly influence Indiana rates through the cost of reinsurance, which insurers purchase to limit their own financial risk.

Recent findings by the Fair Housing Center of Central Indiana show that average home insurance premiums in the state increased by 16% between 2021 and 2024. In the Indianapolis metropolitan area, rates rose by 16.5% over the same period.

As premiums rise, more homeowners are struggling to keep coverage. In 2022, about 1.8% of Indiana policies were canceled due to non-payment, and 1.2% were not renewed. For those who lose coverage, Indiana offers a FAIR Plan, short for Fair Access to Insurance Requirements, which provides limited coverage as a last resort. However, experts stress that the FAIR Plan is not designed to be a permanent solution.

Consumer advocates warn that rising costs are placing vulnerable homeowners, particularly those on fixed incomes, at risk. Many low-income Hoosiers who have paid off their mortgages are foregoing insurance altogether, potentially jeopardizing their most valuable asset and any opportunity for generational wealth-building.

Nationwide, the home insurance market continues to face pressure, and Indiana is no exception. While the state’s premiums remain below the national average, the current trajectory suggests that affordability and access will continue to challenge homeowners in the years to come.