From devastating hurricanes and wildfires to catastrophic floods and tornadoes, natural disasters are increasing in frequency and cost. According to the NOAA National Centers for Environmental Information (NCEI), over the past ten years, 152 disasters caused at least $1 billion dollars of damage per occurrence. This puts the total cost of billion-dollar disasters to more than $1.1 trillion over the past ten years. Climate change plays a major role in the frequency and intensity of severe weather. In addition to factors like insufficient building codes, increased population in vulnerable areas and inflation, the death tolls and financial cost of extreme storms may continue to rise every year. Homeowners bear the brunt of the financial burden and need to have adequate insurance coverage or risk paying out of pocket to rebuild their homes.

Key takeaways

  • The main natural disasters impacting the cost of homeowners insurance are tropical cyclones, wildfires, tornadoes, flooding, earthquakes and severe storms.
  • Experts predict that the frequency of extreme weather will cause home insurance costs to continue to rise in 2023 and in future years.
  • Typically, standard homeowners insurance policies exclude damage from earthquakes, floods, mudflows, landslides and tsunamis.
  • Population growth in severe weather-prone areas and a lack of adequate building codes add to the increased cost of natural disasters.

2023 Natural disaster-related data and statistics

The average cost of homeowners insurance in the U.S. is $1,428 per year for $250,000 in dwelling coverage. Home insurance premiums vary across the nation and one of the most substantial rating factors determining the cost of insurance is location. Homeowners in high-risk areas may pay more than homeowners in areas at a lower risk from natural disasters, even within the same state. However, other factors impact insurance rates, such as the age and condition of your home, so what you pay could vary dramatically from the average in your area.

The chart below highlights the average cost of home insurance in several states prone to natural disasters, as well as the average cost of home insurance in high-risk cities within those states.

State Average annual premium City at high risk of disaster loss Average annual premium Potential natural disaster
Texas $1,967 Deer Park $2,166 Fires, tornadoes, flooding and hurricanes
Mississippi $1,900 Diamondhead $2,161 Hurricanes and flooding
Oklahoma $3,659 Oklahoma City $4,123 Tornados, wildfires, ice storms and flooding
California $1,225 Lake Arrowhead $1,428 Earthquakes and wildfires
Florida $1,981 Miami $3,050 Hurricanes and flooding

*Premiums shown are for $250,000 in dwelling coverage.

The NCEI divided the most significant natural disasters into ten categories for its Billion-Dollar Weather and Climate Disaster report. There have been 357 disasters costing more than $1 billion each in the U.S. since 1980. The chart below shows the four most common disasters in the U.S., which also encompass losses from hurricanes and tornadoes.

Billion-dollar disaster events from 1980-2023

Event type Total number of events Total cost Average cost per year Average deaths per year
Flood 41 $187.6B $4.3B 16
Severe storm 174 $411.8B $9.4B 47
Tropical cyclone 60 $1,347.6B $30.6B 157
Wildfire 21 $134.5B $3.1B 10

*Source: NCEI

Droughts are the second-biggest natural disaster that affects the U.S., with Fallon, Nevada experiencing droughts averaging 184.5 weeks. Droughts cause the earth beneath your home to dry out and shrink, which could cause your foundation to crack. An uneven foundation can lead to foundation cracks and leaks, cracks in your interior or exterior walls, misalignment of doors and windows and more. However, damage resulting from the natural shrinking, expanding, and settling of soil is typically excluded from homeowners insurance.

How natural disasters impact your home insurance rate

When homeowners buy insurance, it is a way to transfer the risk of financial loss to an insurance company instead of retaining the risk of loss themselves. In turn, insurance companies share this risk by purchasing reinsurance — insurance for insurance companies. When a catastrophic loss occurs, insurance companies file a claim with reinsurers to cover excess loss without fear of insolvency or impact on long-term profitability. So, if insurance companies have insurance, how do natural disasters impact your home insurance rates?

With climate change increasing the frequency and severity of catastrophic losses, reinsurance companies have drastically increased the rate they charge to insurance companies, which gets passed back down to policyholders. Since insurance is a shared risk pool, you are sharing in the claims and profitability of your insurance company, good or bad. When an insurance company has to pay out for natural disasters in one area, it can impact the insurance rate of all of its policyholders, especially those in states likely to experience more catastrophic losses in the future.

There are several factors that are adversely affecting the insurance market, one being the claims payouts as a result of Hurricanes Irma, Michael, Ian and Nicole, totaling more than $46 billion dollars to date. Payments associated with Hurricane Ian are expected to increase. As hurricanes become stronger, the severity and frequency of claims may increase, resulting in higher claim payouts. As a result of these factors, insurance companies are taking steps to mitigate their risk and reduce their exposure by increasing insurance rates and refusing to insure certain homes. — Tasha Carter | Florida’s Insurance Consumer Advocate

Another factor is the cost impact of transportation, materials and labor when disaster strikes. Often, local materials get wiped out from a disaster, so building materials, contractors and other builders are transported to the site. The diversion of people and resources creates a drought of builders and materials in locations not directly impacted by the disaster. The rules of supply and demand kick in, causing steep price hikes on many goods and services, making the cost to repair and rebuild homes higher.

Does homeowner’s insurance cover natural disasters?

A homeowners insurance policy provides coverage for specific perils or events. Depending on your state, insurance provider and type of policy, coverage options and deductibles will vary, sometimes greatly. Commonly covered perils related to natural disasters are:

  • Fire and smoke: From electrical fires inside your walls to cooking mishaps, insurance will cover most fires. Fires intentionally started are excluded. Homes in areas prone to wildfires may require a separate endorsement and/or have a stand-alone deductible, or have wildfire coverage excluded from the policy.
  • Windstorm and hail: Wind or hail damage from tornadoes, derechos, gales and hurricanes are some of the wind events covered by most policies. Homes in areas with frequent tornadoes and hurricanes may have a separate wind and hail deductible, require an additional endorsement, or be excluded from the policy.
  • Lightning: Lightning strikes can cause physical damage to your home, electrical surges to your appliances, and fires; all are usually covered by your standard home policy.
  • Weight of ice, snow or sleet: Blizzards and snowstorms with high winds can cause snow to accumulate rapidly on the rooftop of your home and other structures. Damage from the weight load is typically covered.
  • Volcanic eruption: Volcanoes are not a common concern for most homeowners. However, homes in an area with potentially active volcanoes may have coverage from ash, dust, lava flow, fire and explosions resulting from volcanic eruptions.
Insurance Home
Standard homeowner policies exclude damage from earthquakes, flood, mudflows, landslides and tsunamis. Insurers may also exclude or limit coverage in areas prone to wildfires and high winds (hurricanes and tornadoes). A few key things to understand about home insurance and natural disasters:
  • Natural disaster insurance is not a singular type of insurance you can purchase. Instead, it is a term used to describe a collection of insurance coverage on a home policy that provides coverage for natural disasters.
  • The terms peril and hazard often need clarification. A peril is an insurance term for something that poses a risk of loss, while a hazard increases the risk of loss. For example, a covered peril in homeowners insurance is fire. Wildfires are natural hazards since they increase the risk of loss from a fire.

Usually, homes are one of the most significant financial investments people make. Owners living in high-risk areas can still protect their assets by purchasing endorsements to amend their policies or find stand-alone coverage for most perils caused by natural disasters. If adding an earthquake endorsement to an existing policy is not an option, for instance, many insurance companies offer separate earthquake insurance. California homeowners may also find coverage through the California Earthquake Authority (CEA).

Flood insurance is typically purchased separately through a private provider or the National Flood Insurance Program (NFIP). Homeowners needing wind or wildfire coverage may be able to add it through an endorsement or purchase windstorm insurance or wildfire insurance through a state program. Check with your agent to verify that your homeowners policy has the right type of coverage for disasters inherent to the climate in your area.

Highest-risk areas for natural disasters

Looking at any natural disaster map will show you that natural disasters can touch any part of the U.S. Extreme weather occurs year-round in one form or another. According to the National Weather Service, winter weather events usually occur between October 15 and April 15. When winter transitions into spring, the fire season starts due to dryer foliage and warmer weather. Fire season lasts from May to August, but depending on the region and preceding winter weather, it can begin as early as February and is at its peak in late summer. Spring and summer months bring tornado and hurricane season, with tornadoes most likely to occur between May and July and hurricanes with flooding from June through the end of November.

Earthquakes and tsunamis are the least predictable of natural disasters. Earthquakes and tsunamis do not have a typical season and both can occur at any time of the year. The United States Geological Survey notes that through examination of earthquake record-keeping dating back to 1900, we can expect to have about 16 earthquakes a year. Earthquakes that last longer than 20 seconds are most likely to cause a tsunami. The map below shows which regions in the U.S. are considered at high-risk for natural disasters.

Graphic of the United States with common natural disasters highlighted in their associated regions

States that are most impacted by flood costs

A study published by Nature Climate Change indicates that climate change is increasing the risk of flooding, with population growth being a driving factor. The northeast may see increased flooding and Texas and Florida could experience a 50 percent increase in flood exposure by 2050. The top five states that currently experience the most flooding are:

“FEMA recently rolled out its Risk Rating 2.0 methodology and updated its flood maps” advised Carter. “Homes that were not previously in a flood zone may now be considered to be in a flood-risk area. Consumers with homes in a flood zone may now be required to obtain flood insurance as a requirement of their mortgage lender or homeowners insurance company, thus increasing costs” she cautions. “Certain policyholders of Citizens Property Insurance Corporation are now required to secure flood insurance. Those policyholders will also incur increased costs due to the added premium.”

Flood and wind coverage are the two most sought-after coverage types in hurricane-prone areas. Most homeowners find flood insurance policies through the NFIP, and they may also need windstorm insurance if wind damage is excluded from their standard home coverage. Known as “insurance of last resort”, state-funded insurers such as Louisiana Citizens Property Insurance Corporation and Texas Windstorm Insurance Association provide wind damage coverage—but typically at rates much higher than what is available for homeowners in less-risky areas through the private market.

States that are most impacted by wildfire damage costs

Wildfires can quickly spread from remote forest locations into more populated areas. Humans cause about 85 percent of these devastating wildfires through intentional and unintentional acts. Fire is a common peril covered by homeowners insurance; however, owners who live in wildfire zones may need to purchase a separate policy for wildfire coverage.

Insurance Home
Top five states that experience the most loss from wildfire damage:
  • California: State average home insurance premium: $1,125
  • Texas: State average home insurance premium is: $1,967
  • Colorado: State average home insurance premium: $2,162
  • Arizona: State average home insurance premium: $1,269
  • Idaho: State average home insurance premium: $905

“We need individual homeowners and residents to take actions to keep their homes fire safe so that you have every chance to escape injury or death when a fire occurs”, says Dr. Lori Moore-Merrell, U.S. Fire Administrator. “In communities built near forested areas or in previously forested areas, to minimize the chance of home ignitions, fuels around the home can be removed, reduced or relocated. Homes can also be hardened to prevent ignition from airborne embers by taking action to use ignition resistant roof coverings, vents, windows and fences. Fire is everyone’s fight.”

Frequently asked questions

    • FEMA has 18 natural hazards listed in its National Risk Index. Of those hazards, flooding is the most common disaster in the U.S., costing about $5 billion dollars and causing over 100 fatalities per year. Other common disasters are drought, tornadoes, tropical cyclones, hurricanes (which cause heavy flooding), wildfires and earthquakes.
    • Delaware has had the fewest natural disasters on record since 1953. Delaware experiences four distinct seasons, but none too intense—Nor’easters are Delaware’s most common type of extreme weather. Homeowners in Delaware pay $679 per year on average for $250,000 in dwelling coverage, 52 percent less than the national average for the same coverage level.
    • Oklahoma homeowners insurance is by far the most expensive in the nation. On average, homeowners pay $3,659 annually, or $305 monthly, for $250,000 in dwelling coverage. That’s 156 percent higher than the national average. Oklahoma gets struck by about 62 tornadoes per year on average. While its tornado toll is lower than Texas, which has about 155 tornadoes per year, Oklahoma tends to have stronger tornadoes and is less than half the size of Texas. When tornadoes touch down in Oklahoma, they are more likely to come into contact with heavily populated areas and cause significant damage to people and property.
    • Even after 18 years, Hurricane Katrina remains the most expensive natural disaster in U.S. history, according to the NCEI. While the financial toll was high, costing $192.5 billion (adjusted for inflation), the emotional cost was just as heavy. Impacting Louisiana and Mississippi populations the most, there were 1,833 casualties and millions of people displaced for months and years. Post-Katrina, Louisiana has made $14.5 billion worth of upgrades to the Hurricane & Storm Damage Risk Reduction System (HSDRRS), which has successfully shielded New Orleans from severe hurricane damage since then.
    • California, Florida, Texas, Louisiana and parts of New York can be the most challenging states to find home insurance in right now, with California and Florida typically being the toughest. Increased hurricanes and flooding along the Atlantic and Gulf of Mexico coast pose an increased risk of catastrophic loss and have combined with rampant litigation issues to cause  insurance companies to severely limit the location and amount of policies offered in Florida. California, meanwhile, has been experiencing unprecedented wildfires, causing several prominent insurers like Allstate, State Farm and most recently, Farmer’s and AIG to stop writing new property policies for home and commercial buildings. If you’re having difficulty finding home insurance in your state, consider talking with a licensed insurance agent or reach out to your state’s Department of Insurance to learn more about alternatives.