Home insurance rates offered by State Farm are set to increase by 27% within a specified state.
In the United States, homeowners in states like California and Illinois are feeling the pinch as home insurance premiums continue to rise. This trend is primarily due to increasing risks from natural disasters and the escalating costs of claims, materials, and labor.
In Illinois, State Farm, one of the leading insurance providers, is raising homeowners' insurance rates by approximately 27%. This hike will add around $746 annually to the average policyholder's premium. The reasons behind this increase are clear: in 2024, for every dollar collected in premiums, State Farm paid $1.26 in claims costs. This imbalance is largely driven by more frequent and severe weather events, such as hailstorms, which caused Illinois to have one of the highest numbers of hail damage claims after Texas.
Redfin's chief economist, Daryl Fairweather, agrees with State Farm's assessment, attributing the rising cost of home repairs after disasters to inflation. Fairweather also expressed concern that the increase will cost Illinois homeowners hundreds of dollars more per year without a state-based justification or increased protection.
Meanwhile, in California, State Farm requested a 17% interim rate increase, effective from renewals starting June 2025. The company highlighted the need to align insurance premiums with the greater risks posed by wildfires and other natural disasters. Over the past nine years, State Farm General Insurance paid out $1.26 for every $1 collected in premiums in California, resulting in more than $5 billion in underwriting losses. To manage exposure, the company has limited new policies in high-risk areas and requested rate increases to rebuild capital and maintain financial stability.
However, the situation is not ideal for all Californian homeowners. According to recent reports, only five out of the top 12 insurance companies are still offering new home insurance policies in the state.
The upward pressure on home insurance premiums reflects insurers needing to price policies to cover increasing risk and avoid further financial losses. This trend is a concern for policymakers and homeowners alike, particularly amidst affordability issues in the U.S. housing market.
Illinois Gov. JB Pritzker has criticized State Farm's rate hike, stating it is "unfair and arbitrary". Pritzker also expressed concern that the increase will cost Illinois homeowners hundreds of dollars more per year without a state-based justification or increased protection.
It's important to note that millions of homes across the country lack home insurance coverage, with 11.3 million uninsured owner-occupied homes in the U.S. according to the latest LendingTree study. This underscores the need for affordable and accessible insurance options for homeowners.
In the wake of these increases, it's crucial for homeowners to shop around for the best rates and understand their insurance coverage to ensure they are adequately protected.
[1] National Oceanic and Atmospheric Administration (NOAA) - Climate.gov [2] Insurance Information Institute (III) - Climate Change and Catastrophes [3] Property Casualty Insurers Association of America (PCI) - Catastrophe Losses [4] State Farm - California Insurance Rate Filing FAQs
- The escalating costs of home insurance premiums in states like California and Illinois, coupled with inflation, pose significant financial challenges for homeowners.
- With business losses mounting due to frequent and severe weather events, the insurance industry looks to finance and economy experts for guidance on maintaining financial stability amidst rising claims costs.
