According to new research from the Federal Reserve Bank of Dallas, rising homeowners insurance premiums are exacerbating the financial burden of households across the nation that are struggling with mounting housing costs.
The researchers noted that when insurance premiums rise, homeowners have limited ways to respond. be it shopping for cheaper coverage by switching insurers.
Some people even relocate to regions where insurance is less expensive, the report said. That may not be possible for everyone, however, as limited-income households may be less likely to shop for lower-cost insurance and may find moving out of reach.
Instead, the report said, higher premiums can lead to greater reliance on credit cards, delayed mortgage payments, and potential home loss. Because mortgages constitute a substantial share of household debt and bank assets, rising delinquencies can threaten broader financial stability, according to Dallas Fed report.
The Dallas Fed study noted that on one hand, rapidly rising insurance premiums can lead to geographic sorting. People who can afford to relocate do so to safer areas that are less prone to catastrophic claims, the Fed said. On the other hand, higher insurance costs also may increase delinquencies among homeowners, creating mortgage losses for those holding the notes.
Greater Climate Disaster Risk
Nationally, insurance premiums rose roughly 70% from 2019 to 2025, reflecting greater climate disaster risk and higher construction costs, the Dallas Fed said.
Its research looked at the insurance share of monthly mortgage payments, using recently available data from ICE McDash, a source of mortgage performance information. ICE McDash captures actual homeowner insurance payments for mortgagees, covering roughly two-thirds of the U.S. mortgage market.
For the average homeowner, the insurance premium represented 14% of the monthly payment that includes mortgage principal and interest in 2025. The researchers said that share compares with 10 percent in 2013, meaning that that for many households over time, insurance has become a more substantial component of the monthly mortgage payment.
In recent research, using detailed mortgage-level ICE McDash data covering 2015 to 2023, the researchers studied how rising homeowners insurance premiums affect household credit outcomes and relocation decisions. After linking insurance records with mortgage performance, credit reports and relocation data, three key findings emerged.
First, households with larger premium increases are more likely than other households to relocate to areas with lower insurance premiums. When premiums rise sharply, the Fed noted,. moving becomes part of a broader adaptation strategy. The researchers found that a $1,000 increase in insurance premium rates corresponds to a 0.54-percentage-point increase in relocation probability. The present value of the movers’ premium savings amounts to around $14,274 over 30 years (assuming a 6% discount rate).
Second, for households that can’t adjust by moving or switching insurers, higher premiums lead to financial distress. Increases in annual premiums raise the likelihood of falling behind and becoming delinquent on mortgage payments. The researchers estimated that premium increases pushed roughly 31,000 mortgages into delinquency in 2022.
More Mortgage Delinquency Risk
Looking forward, the Fed’s projections suggest that continued increases in premiums could lead to an additional 203,000 mortgages per year falling into delinquency between 2025 and 2055. The calculation is based on an insurance premium projection by First Street Foundation, which specializes in modeling climate risk. The analysis estimates premiums will rise 29.4% by 2055 on average in the U.S.
Third, the effects are unequally distributed, the Dallas Fed said. Financially limited households—those with lower credit scores—are much more likely to experience mortgage delinquency following premium increases, while financially secure households are more likely to respond by switching insurers or relocating. Over time, the Fed said that dynamic could reshape communities, concentrating lower-income households in areas with higher climate risk and rising insurance costs, while more affluent households move away.
The Dallas Fed’s researchers said that when taken together, their findings highlight a new channel through which climate change affects both households and the financial system. The rise in mortgage delinquencies driven by higher insurance premiums has consequences extending beyond individual households to the broader economy, they said.
The researchers noted that the effect of rising insurance premiums is widespread across the mortgage market with delinquencies present among both government-sponsored and nongovernment-sponsored mortgages. When delinquencies increase, the researchers noted, they can strain mortgage markets and raise losses for lenders and government-backed or private entities that insure or guarantee home loans.
