Property insurance costs are still rising, though the pace of growth has slowed over the past year, according to a new report from the Bank of America Institute. The study examined property insurance costs, including auto and homeowners coverage, in the 12-month period ending in May 2025.
The report found that property insurance payment growth decelerated to 6% compared with the prior 12-month period. This marks a notable drop from the 13% year-over-year increase recorded between June 2023 and May 2024. Despite the slower growth, the financial impact on households remains significant. Since June 2020, the median household property insurance payment has climbed more than 40%.
Premiums Rising Faster Than Income
The report highlighted that property insurance costs are taking up a larger share of household income. In the period from June 2020 to May 2021, median annual property insurance payments accounted for slightly over 4% of household earnings. By the most recent period ending in May 2025, that share had risen to nearly 5%.
Higher insurance premiums reflect several factors. Analysts point to increasing costs for rebuilding homes and replacing personal property. Construction material prices have remained elevated since the pandemic, and labor shortages have added to expenses.
Wildfire risks also continue to weigh heavily on insurance carriers operating in California. The report noted that with more wildfires projected in the state this year, many insurers have adjusted their rates to account for future claims.
Outlook for the Next 12 Months
Looking ahead, experts expect homeowners insurance premiums to keep climbing into 2026. Home replacement costs are likely to rise as supply constraints persist and demand for skilled labor remains strong.
Wildfire season is already underway in many parts of California, with the Department of Forestry and Fire Protection reporting higher-than-average temperatures and dry conditions. Insurance companies have responded by increasing premiums and limiting new policies in high-risk areas.
Though the 6% rise in property insurance costs represents a slower rate than in previous years, homeowners should still prepare for additional increases over the next 12 months. Policyholders are encouraged to review coverage limits and consider steps to reduce wildfire risk, such as creating defensible space and upgrading building materials when possible.
The Bank of America Institute report concludes that property insurance costs are unlikely to return to pre-pandemic levels anytime soon. For many households, insurance payments will remain a larger part of the monthly budget, especially in regions prone to natural disasters.
For additional information about managing property insurance or exploring local assistance programs, visit the California Department of Insurance at www.insurance.ca.gov.
