Property Insurance Costs: Key Insights for Real Estate Investors

Rising property insurance costs have become one of the biggest challenges for real estate investors in 2025 going into 2026, directly impacting cash flow, portfolio risk, and long-term investment strategy. According to the ICE Mortgage Monitor Report (Sept. 2025), average annual property-insurance premiums for single-family homes have climbed to $2,370, and insurance now accounts for nearly 10% of the typical monthly mortgage payment (PITI). Over the past five years, premiums have increased roughly 70%, far outpacing rent growth in most markets. S&P Global Market Intelligence reports that homeowners-insurance rates rose 10.4% in 2024, following a 12.7% increase the year before, and 33 states saw double-digit premium hikes. For investors holding larger portfolios or high-exposure markets, these increases represent significant pressure on operating margins.

The surge in insurance costs is driven by several market forces investors can’t ignore. First, the frequency and severity of natural disasters—wildfires, hurricanes, severe storms, and flooding—have increased, leading to larger and more frequent claims. Insurers have responded by raising rates, reducing coverage, tightening underwriting requirements, or exiting high-risk states entirely. Additionally, reconstruction costs remain elevated due to inflation, material shortages, and higher labor prices. When rebuilding a damaged home becomes more expensive, insurers adjust premiums to reflect these higher replacement-cost values. Combined, these factors have made insurance one of the fastest-growing operating expenses for investment properties nationwide.

These rising costs directly impact return on investment (ROI) and net operating income (NOI) for both small investors and institutional SFR operators. In high-risk states, some portfolios are experiencing year-over-year insurance increases of 20% or more, forcing investors to reassess acquisition strategies, underwriting assumptions, and market-level exposure. For leveraged investors, higher premiums mean reduced cash flow and tighter debt-service coverage ratios, which can affect refinancing outcomes and long-term portfolio stability. Insurance risk is now a major factor influencing which markets investors enter—or exit—especially as Sunbelt and coastal markets experience more severe premium escalation.

To manage this shifting landscape, investors should consider several proactive strategies. Annual policy reviews and competitive carrier comparisons can help mitigate year-to-year cost increases. Increasing deductibles, where appropriate, may reduce premiums without materially increasing risk exposure. Investors should also factor insurance inflation into long-term cash-flow models and stress-test deals using higher future premium assumptions. Geographic diversification, particularly into markets with lower catastrophe exposure and more stable insurance environments, is becoming increasingly important. Additionally, property upgrades such as impact-resistant roofing, improved drainage, wildfire mitigation, and other resilience measures can reduce risk and, in some cases, lead to premium credits.

Looking ahead to 2026, rising property insurance costs are expected to remain a defining trend in the real estate investment space. With insurers continuing to recalibrate risk models and adjust pricing based on climate-related losses and construction costs, investors must integrate insurance considerations into every stage of their analysis—from acquisition and due diligence to asset management and exit planning. Those who adapt early will be better positioned to preserve cash flow, maintain portfolio performance, and capitalize on opportunities in markets where insurance pricing remains manageable.

If rising insurance costs are impacting your investment strategy, the REI Division at Unitas Financial Services can help you evaluate risk, streamline portfolio protection, and identify insurance solutions built specifically for real estate investors. Our team specializes in supporting SFR operators, landlords, and investment groups navigating today’s shifting insurance landscape.

Contact the REI Division of Unitas Financial Services today to discuss how we can help protect your portfolio and improve long-term performance.