In parts of California and Florida, the biggest threat to closing a mortgage isn't the borrower's credit score. It's whether anyone will insure the house at all.
For decades, homeowners insurance (HOI) was the least dramatic line item in a mortgage file. A borrower showed proof of a policy, the lender confirmed it covered the loan amount, and everyone moved on. That assumption is breaking down. As climate-driven disasters grow more frequent and severe, insurers are pulling back from entire states, non-renewing policies by the ZIP code, and pricing coverage out of reach for a growing share of borrowers. What used to be a routine underwriting checkbox is turning into a real credit risk variable.
Every conventional mortgage requires the borrower to carry HOI covering at least the loan balance, for one simple reason: the home is the collateral. If it burns, floods, or blows away with no insurance payout to rebuild it, the lender is holding a loan secured by a pile of debris. That's why proof of insurance has always been a closing requirement, and why an active policy is supposed to stay in force for the life of the loan.
The problem is that "supposed to" is doing a lot of work right now. Home insurance premiums rose 12.7% in 2023 and another 10.4% in 2024, and from 2020 to 2024 premiums climbed 41.4% nationally, far outpacing the 22.5% cumulative rise in consumer prices. Insurance has also become a much bigger slice of the mortgage payment itself, growing from 7 to 8% of total mortgage costs in 2013 to roughly 20% by 2022. When one line item nearly triples its share of the monthly bill in a decade, it stops being background noise for underwriters.
The national picture is stark on its own:
That last point matters to lenders as much as the rising premiums do. A borrower can have an active policy on closing day and still end up uninsured a year later if the carrier itself goes under.
Insurers in California have pulled back sharply from wildfire-exposed areas. State Farm, Allstate, and AIG all stopped writing new homeowners policies in the state in the first half of 2023, and State Farm has signaled plans to cut roughly a million existing policies by 2028. Even after regulators moved to modernize rate-setting rules, California still placed second-worst nationally for nonrenewals in 2025, with insurers declining to renew nearly 3% of policies in force.
In Florida, average premiums remain the highest in the country running roughly $6,000 to $8,500 a year depending on dwelling coverage. Many carriers have gone insolvent or exited the state since 2020. The state's insurer of last resort, Citizens Property Insurance, continues to insure parts of the state that may be uninsurable otherwise.
At least a dozen insurers left the state after four major hurricanes in 2020 and 2021, and the state now carries the second-highest average premiums in the nation. The effect on lending is severe; in fact, 30 to 40% of mortgage loans in Louisiana fail specifically because of high home insurance costs.
Hail and wind, not just hurricanes, are driving the retreat. Texas led the nation in hail events and tornadoes in 2024, and non-renewal complaints tracked by the Texas Department of Insurance more than doubled that year. A new state law effective January 2026 requires insurers to disclose non-renewal reasons by ZIP code, a sign regulators see the same hyper-local pullback already playing out in California.
Wildfire risk pushed the state to stand up its own insurer of last resort. Colorado's FAIR Plan, which began accepting residential applications in April 2025, exists because so many homeowners were being denied coverage outright. Average premiums have climbed significantly YoY, with even steeper rates in fire-exposed corridors like Colorado Springs.
The crisis isn't confined to coastal or classic wildfire states anymore. Utah had the highest insurer-initiated homeowners nonrenewal rate in the country, at 4% of policies in force. Rapid home construction in fire-prone terrain, combined with rising wind and hail losses, pushed Utah from a relatively affordable market to the nation's top spot for nonrenewals in a single year. If a landlocked, historically low-risk state can shift that quickly, few regions should assume they are insulated.
This is where the problem stops being just an insurance one. Continued withdrawal by banks and insurers from disaster-prone regions could eventually leave entire areas of the country without practical access to mortgages. The Financial Stability Oversight Council has gone further, naming climate change an emerging threat to U.S. financial stability, citing its effects on home insurance markets directly.
And loan performance is already measurable, not just theoretical. Premium increases between July 2022 and June 2023 were associated with an 8% increase in mortgage delinquency rates. The same research linked rising premiums to greater borrower reliance on credit cards, a pattern that can quietly erode creditworthiness long before a loan shows up as delinquent on a servicer's dashboard.
Ultimately, insurance non-renewals and premium spikes aren't just squeezing borrowers' household budgets. They are already showing up in loan performance data.
A few practical realities are converging on origination and servicing teams at once:
For lenders, this means a one-time insurance check at closing no longer reflects the real risk sitting behind the loan. Insurability itself has become a moving target, and much of the mortgage industry's underwriting and servicing infrastructure hasn't caught up to how quickly that target can move.
The next question is a practical one: if insurance status can change at any point during a loan's life, how does a lender actually find out when it does, rather than discovering it through an escrow shortfall or a force-placed insurance notice months later? That's the operational gap the industry needs to close, and it starts with rethinking how HOI coverage gets verified in the first place.
For mortgage lenders, finding the right partner in reliability, consistency, and accuracy is the key to maintaining solid ground in the years ahead for HOI. Let MeasureOne be that partner.
With MeasureOne, mortgage lenders get:
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