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Home insurance premiums rose 21% in 2023, partly due to climate change

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A view of flooded streets after 24 hours of continuous heavy rain over Fort Myers, Florida, United States on June 13, 2024.

Anadolu | Anadolu | Getty Images

Consumers preparing to renew their homeowners insurance policy may experience some unexpected sticker shock.

Between May 2022 and May 2023, home insurance prices rose an average of 21% at renewal time, according to Policygenius.

A rise in catastrophic severe weather events contributed to this jump, experts say, and the rate of price increases is not expected to slow. As insurers face higher costs, they pass those along to consumers in the form of pricier premiums.

However, insurers don’t share data on individual homeowners’ premiums and risks, so it’s difficult to calculate just how climate risk is factored into the price of policies.

The hidden reason some U.S. homes are losing value

“The levels of risk and the kinds of hazards that a property can be exposed to are massively changing,” said Carlos Martín, director of the Remodeling Futures program at the Joint Center for Housing Studies of Harvard University.

“And right now there’s a lot of confusion, not just among the homeowners, but also among the insurers about how they should be pricing this actuarially,” he said.

‘Minimal’ data available from insurers

Though home insurance premiums jumped significantly in price last year, it isn’t a new phenomenon. To that point, between 2012 and 2021 the average premium rose from $1,034 to $1,411, according to the Insurance Information Institute.

Some of the annual increases within that stretch of time were bigger than others, according to Kenneth Klein, a professor at California Western School of Law, adding that climate change creates the potential of economic “fat-tailed losses,” because storm damage isn’t spread evenly across all insured properties or evenly over time.

“For many insurance companies in the Gulf Coast area, if they economically survived Katrina, the next year was one of their most profitable years,” he said. “Because their premiums adjusted for Katrina, but there wasn’t a Katrina event. So that’s the challenge of insuring climate change.”

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Understanding how premiums will continue to rise in response to severe weather is hard to gauge, according to Martín.

“The data is pretty minimal,” Martín said. “Insurers don’t share how much they’re charging individual homeowners with the world, and there’s not a lot of reporting.”

Scott Shapiro, KPMG U.S. insurance sector leader, said the industry does gather this data on weather-related losses to inform policy premiums, but the detailed data isn’t publicly accessible.

“This data is crucial for rate making and filings,” Shapiro said. “A key challenge is the increasing exposure to weather-related risks and the uncertainty of whether historical losses accurately predict future losses.”

Insurers are pulling back in high-risk areas

The cost of home insurance might be rising, but for some in areas at risk of flood or fire, homeowners may have few options.

In May 2023, for example, State Farm stopped accepting new applications for California policies. Allstate announced in November 2022 that it would pause new home, condo and commercial policies in the state.

Insurance companies “are not in the business of giving you money just because you need it, and they are not in the business of doing the right thing just because it feels like the right thing,” Klein said. “They are businesses that are trying within a set of laws and regulations to make a profit.”

Fewer and pricier insurance options can prove to be a significant barrier to homeownership, experts say, as most mortgages require insurance.

2024 Atlantic hurricane season hits home insurance rates

Florida’s legislature created Citizens’ Property Insurance in 2002 as an option for Floridians who couldn’t find home insurance in the private market. California’s FAIR plan was established as a statute in the state’s insurance code to provide fire coverage unavailable in the traditional market, though it’s not a state or public agency. 

Though state-run programs might serve as a last resort, they don’t always provide the same quality of coverage that a private insurer might offer.

“They sometimes are not built on the same actuarial principles as private insurance company would build them,” Klein said. “And as a consequence, it’s problematic. It’s often not good coverage.”

Those feeling the pain of rising premiums the most are existing homeowners, Martín said.

“They’re feeling it, because they see what they’re paying when they first bought the house, and now they see what they’re paying,” he said. “And it’s increasing.”

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Consumers are making different financial choices in response to tariffs

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The Apple Fifth Avenue store in New York, U.S., on Monday, Feb. 24, 2025.

Michael Nagle | Bloomberg | Getty Images

Even as a pause on reciprocal tariffs has been put into effect, consumers are already anticipating the pressures of higher prices.

A majority of Americans — 85% — have concerns about the tariffs, according to a new NerdWallet survey of more than 2,000 individuals conducted this month.

Among top concerns of consumers is that the new policies will impact their ability to afford necessities and that the U.S. economy will fall into a recession.

Meanwhile, cracks in consumer confidence are showing elsewhere.

The University of Michigan’s consumer survey shows sentiment has dropped by more than 30% since December among persistent worries of a trade war. The latest reading for April fell 11% from the previous month, which was worse than expected.

The worries are not unfounded, experts say. Tariffs could cost the average household $3,800 per year, the Budget Lab at Yale University estimates.

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“Most Americans are worried about tariffs, and it’s actually impacting their spending plans,” said Kimberly Palmer, personal finance expert at NerdWallet.

In the next 12 months, a significant portion of individuals surveyed by NerdWallet plan to make changes to their spending habits, with a notable shift towards saving more.

Specifically, 45% plan to spend less on non-necessities, 33% intend to spend less on necessities, and 30% plan to save more money in an emergency fund. However, a smaller percentage, 14%, anticipate paying less on their debts.

The tariffs come as consumers were already struggling to pay for groceries and other essentials amid higher prices, according to Palmer.

“These tariffs are adding to that financial stress and basically forcing people to make some difficult decisions,” Palmer said. That includes scaling back on travel and planned big-ticket purchases like a car.

Emergency savings is ‘most important’ priority: expert

New economic pressures may prompt income to be eaten up by rising prices and competing interests, according to Stephen Kates, a certified financial planner and financial analyst at Bankrate.

Consumers may have to make tough choices between saving, investing and paying down debts.

“If you have nothing [saved], start with the emergency fund,” Kates said.

Individuals should strive to have at least one month of essential expenses set aside at the very minimum, Kates said. Ideally, that would be more like three to six months’ living expenses, he said.

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That way, if a job or other income loss happens, consumers can protect themselves from going into debt, Kates said.

For individuals who already have racked up debt balances, prioritizing emergency savings still makes the most sense, Kates said. And if you’re choosing between emergency savings or saving for retirement, emergency savings should still be the highest priority, he said.

To be sure, that doesn’t necessarily mean individuals should ignore their other goals.

Kates discussed using what is called the “debt avalanche” strategy.

The focus is on paying down the debt with the highest interest rate first — while paying minimums on the others — then move on to the account with the next highest rate, and so on. That can provide an immediate return and help free up money in household budgets, Kates said.

When it comes to retirement savings, it’s important to make sure individuals are contributing enough to take advantage of a match, if their employer offers one, he said.

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Trump said tariff revenue could replace the income tax. What experts say

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In this aerial view a forklift drives among stacked shipping containers in Hamburg Port on April 15, 2025 in Hamburg, Germany.

Sean Gallup | Getty Images

Tariff tax base is ‘a lot smaller’ than income tax

Some policy experts have questioned how much revenue the duties could bring in, compared to the federal income tax. 

“The tariff tax base is a lot smaller than the income tax base,” Kimberly Clausing, a senior fellow at the Peterson Institute for International Economics, told CNBC.

In 2023, the U.S. imported $3.1 trillion of goods. By comparison, the government levied tax on more than $20 trillion in incomes, according to a report she co-authored last summer.

White House trade adviser Peter Navarro in late March estimated tariffs could raise roughly $600 billion a year.

But that figure “is not even in the realm of possibility,” Mark Zandi, chief economist at Moody’s, told CNBC earlier this month. “If you get to $100 billion to $200 billion, you’ll be pretty lucky.”

To compare, the IRS has collected $1.14 trillion in individual income taxes for fiscal year 2025 through March 31, according to Treasury data.

“Tariff rates would have to be implausibly high on such a small base of imports to replace the income tax,” Clausing co-wrote in the Peterson Institute for International Economics report.

Plus, at higher tariff rates, people will buy fewer imported goods, which reduces revenue, Clausing told CNBC: “That’s part of the point of the policy.”

The Trump administration did not respond to CNBC’s request for comment.

Consumer behavior influences tariff income

As tariff rates increase, other factors can decrease how much revenue the U.S. ultimately collects, experts say.

“The administration seems to think that every time it raises the tariff rate that it can collect more revenue,” Tax Foundation’s Durante said. “And that’s not always the case.”

Direct tariff revenue is lowered by behavioral and other economic factors, Durante detailed in a report earlier this month.

Seeking safety amid market volatility: Strategies to keep your money safe

The Tax Foundation estimates that a 10% universal tariff would raise $2.2 trillion through 2034. However, the same tariff would reduce U.S. gross domestic product by 0.4%, which impacts revenue.

The International Monetary Fund on Tuesday reduced 2025 U.S. growth projections to 1.8% from 2.7% based on trade tensions.

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What student loan borrowers need to know about involuntary collections

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U.S. Secretary of Education Linda McMahon smiles during the signing event for an executive order to shut down the Department of Education next to U.S. President Donald Trump, in the East Room at the White House in Washington, D.C., U.S., March 20, 2025. 

Carlos Barria | Reuters

In a Wall Street Journal op-ed, U.S. Secretary of Education Linda McMahon explained the U.S. Department of Education’s decision to restart collections on federal student loans that are in default — and what comes next for Federal student loan borrowers who are behind on their bills.

“On May 5, we will begin the process of moving roughly 1.8 million borrowers into repayment plans and restart collections of loans in default,” McMahon wrote in the op-ed Monday.

“Borrowers who don’t make payments on time will see their credit scores go down, and in some cases their wages automatically garnished,” McMahon wrote.

Next steps for borrowers

Federal student loan borrowers in default will receive an e-mail over the next two weeks making them aware of this new policy, the Education Department said.

These borrowers should contact the government’s Default Resolution Group to make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation

The Education Department said it is extending the Federal Student Aid call-center operations with weekend hours as well updating a “loan simulator” to help borrowers calculate their repayment plans. There is also an artificial intelligence assistant, dubbed Aidan, to help with a financial strategy.

“We are committed to ensuring that borrowers are paying back their loans, that they are fully supported in doing so, and that colleges can’t create such a massive liability for students and their families, jeopardizing their ability to achieve the American dream,” McMahon wrote.

‘Be proactive’

Those borrowers who are behind in their required payments should avoid being placed in default by taking advantage of various options currently available to them to manage their education loans, advised Kalman Chany, a financial aid consultant and author of The Princeton Review’s “Paying for College.”

“Be proactive,” he said. “Best to take care of this as soon as possible, as the loan servicers’ and the U.S. Department of Education’s customer support will get busier the closer it gets to May 5.”

Student loan matching funds

The Education Department has not collected on defaulted student loans since March 2020. After the Covid pandemic-era pause on federal student loan payments expired in September 2023, the Biden administration offered borrowers another year in which they would be shielded from the impacts of missed payments. That relief period officially ended on Sept. 30, 2024.

“President Biden never had the authority to forgive student loans across the board, as the Supreme Court held in 2023,” McMahon wrote. “But for political gain, he dangled the carrot of loan forgiveness in front of young voters, among other things by keeping in place a temporary Covid-era deferment program.”

McMahon said restarting collections of loans in default was not meant “to be unkind to student borrowers.” Rather, the new policy intended to protect taxpayers. “Debt doesn’t go away; it gets transferred to others,” she said. “If borrowers don’t pay their debts to the government, taxpayers do.”

Currently, around 42 million Americans hold federal student loans and roughly 5.3 million borrowers are in default.

“It really is time to start repaying again,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget said in a statement. “While a short repayment pause was justifiable early in the pandemic, that was five years ago — and it makes no sense today.”

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President Donald Trump in March signed an executive order aimed at dismantling of the Education Department after nominating McMahon for Education secretary. Trump suggested that she would help gut the agency. As part of this overhaul, federal student loan management was then shifted to the Small Business Administration.

Along with changes to the student loan system, the Trump administration revised some of the Department of Education’s income-driven repayment plans, which put at-risk borrowers in “economic limbo,” according to Mike Pierce, executive director at the Student Borrower Protection Center.

“For five million people in default, federal law gives borrowers a way out of default and the right to make loan payments they can afford,” Pierce said in a statement. “Since February, Donald Trump and Linda McMahon have blocked these borrowers’ path out of default and are now feeding them into the maw of the government debt collection machine.”

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