Rising Insurance Premiums Are Undermining Homeownership and Loan Closings

Soaring homeowner insurance costs are creating new obstacles for both mortgage lenders and prospective buyers, with many homeowners struggling to close loans or keep up with existing mortgage payments. What was once a minor box to check in the mortgage process has now become a make-or-break factor.

Insurance Issues Now Blocking Home Loans

According to new data from digital insurance platform Matic, home insurance is no longer just paperwork at the finish line. Instead, it has become a critical barrier that’s delaying or even derailing mortgage approvals.

“In today’s market, home insurance is no longer a checkbox at the end of the process. It’s a critical step that can make or break a loan,” said Ben Madick, CEO and co-founder of Matic.

In just the first half of 2025, the average premium for new home insurance policies rose 9.3%, reaching $1,966. That follows an 18.8% jump from 2023 to 2024 and an 11.6% rise the year before that.

Since 2022, premiums for new policies have surged by 45%, yet the coverage for rebuilding (Coverage A) has only increased by 12%. Homeowners are now paying significantly more for less protection a growing affordability crisis.

💸 Housing Affordability Under Pressure

Madick notes that in some cases, insurance and taxes now make up over half of a homeowner’s monthly mortgage payment. For many families, rising premiums are preventing them from buying a new home or even jeopardizing their ability to stay in their current one.

🌪️ Climate Risks Drive Up Premiums and Deductibles

Climate change is a major factor behind these cost increases. While coastal areas have long dealt with hurricanes and flooding, now even interior regions like the Midwest and Southeast are seeing spikes in convective storms hail, tornadoes, and intense winds.

These events now account for 70% of insured global losses. In states like Colorado, Mississippi, and Texas, double-digit premium increases are becoming the norm.

Additionally, insurance companies are shifting more risk to policyholders. The average deductible has climbed 25% in the past year. Wind and hail deductibles, once flat-rate, now often range between 1% and 5% of the home’s insured value, dramatically raising out-of-pocket costs.

Roof age is also playing a much bigger role in pricing. Since 2022, the premium gap between homes with new vs. older roofs has tripled.

🏗️ Tariffs and Supply Costs Add Fuel to the Fire

Federal tariffs on building materials like steel, aluminum, and copper are also making things worse. These increased material costs push up replacement values, which in turn inflate insurance premiums.

🏦 Lenders Feeling the Heat

The ripple effects of these trends are now disrupting the mortgage industry. A full two-thirds of lenders surveyed by Matic say they’re facing loan-closing delays or rejections due to insurance hurdles.

“We’re seeing closings fall through because insurance costs are tipping borrowers’ debt-to-income ratios over the limit,” Madick said. “Or deals are delayed while buyers scramble to secure coverage.”

In fact, 72% of lenders surveyed expressed deep concern about how insurance market volatility could continue to affect loan pipelines and borrower eligibility.

⚠️ The Takeaway

As homeowner’s insurance becomes a growing financial and logistical burden, proactive involvement by lenders and better collaboration with insurers is now essential. Helping borrowers navigate these challenges early can prevent last-minute surprises, reduce fallout, and ensure smoother closings.

Bottom line: Home insurance is no longer just a formality it’s a defining factor in today’s homeownership journey. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.