Why Property Insurance Costs So Much

You pay for shared risk, not just your own

Insurance works by pooling money from many policyholders to pay the claims of a few. Insurers group properties by things like location (often called a territory), construction type, age, and roof condition. Everyone in a group shares the expected cost of that group's claims.

That is why a quiet year on your street may not lower your premium. If storms or fires hit other properties in the same rating area, those losses can still affect what you pay.

Storms and catastrophes drive much of the cost

Wind, hail, tornadoes, and hurricanes can damage thousands of buildings at once. Insurers have to price for the chance of a rare but very large event, not just the average year. Many insurers also buy their own insurance, called reinsurance, to help pay for huge disasters. New York's Department of Financial Services told lawmakers in 2025 that the cost of property catastrophe reinsurance has nearly doubled since 2017, and that cost is built into premiums.

Rebuilding costs more than it used to

Your dwelling coverage is meant to pay to rebuild, not what the house would sell for. When labor and materials go up, the cost of each claim goes up too. New York regulators, citing the Federal Insurance Office, said replacement costs for property and casualty losses rose about 45 percent on average from 2020 to 2023.

Premiums also include the insurer's expenses, such as agent commissions, claims handling, taxes and fees, plus a margin for profit. Larger lawsuits and jury awards can push claim costs up as well.

Commercial policies have extra parts

A business policy often bundles more than the building. It may include liability coverage, which helps if someone is hurt on the property or sues, and business interruption coverage, which can replace lost income while you are closed after covered damage. Each part adds cost.

Many commercial property policies also have a coinsurance clause, often 80, 90, or 100 percent. If you insure for less than that share of the building's value, a partial claim can be paid at a reduced amount. For example, with an 80 percent clause on a $500,000 building, the policy expects at least $400,000 of coverage. If you carry $300,000 and have a $100,000 loss, the payment may be cut to $75,000 before the deductible.

Deductibles, claim history, and credit

Some policies use a separate wind, hail, or hurricane deductible set as a percentage of the insured value, often 1 to 5 percent. On a home insured for $200,000, a 2 percent deductible means you pay the first $4,000 of covered storm damage.

Insurers may also look at past claims. LexisNexis keeps a CLUE report that generally holds up to seven years of auto and home claims, and you can request a free copy. Where state law allows, insurers may use a credit-based insurance score, which the NAIC describes as one of many factors. Some states limit or ban certain uses.

What you can do

You cannot control the weather, but you can make sure you are paying for the right coverage and getting the discounts you qualify for.

• Get quotes from more than one company, including through an independent agent who can compare several insurers.
• Ask how a higher deductible would change your premium, and make sure you could afford it after a storm.
• Check that your rebuild value is accurate, not too high or too low.
• Ask about discounts for storm shutters, alarms, newer roofs, and other upgrades.
• Ask whether insurers in your state give credits for a FORTIFIED roof, a standard from the Insurance Institute for Business & Home Safety (IBHS).
• Request your free CLUE report and fix any errors.
• Call your state insurance department with questions about rates or your rights.