Climate Change and Home Insurance Premiums in Chicago

Home Insurance Fact Box: What Does the Current Data Show?

The Bottom Line: Major insurance studies measure different populations, time periods, and types of cost. The figures below should be read individually rather than combined into one headline percentage.

Swipe left or right to view the full table.

Data note: Treasury's 82% figure compares average premiums in higher- and lower-climate-risk ZIP codes. It does not mean U.S. homeowners insurance premiums increased 82%.

Why Are Home Insurance Premiums Rising?

The Bottom Line: Home insurance premiums are rising because the cost and expected risk of insuring homes have changed. Climate-related hazards are part of that story, but they are not the only factor.

Insurers also consider rebuilding costs, property characteristics, claims experience, coverage amounts, deductibles, local conditions, and other underwriting factors.

Hazard

A hazard is the potentially damaging event itself—such as severe storms, hail, wind, wildfire, or heavy rainfall. When damaging events become more frequent or severe, expected losses can increase.

Exposure

A weather event becomes more costly when more homes, infrastructure, and other valuable property are exposed to it. Insurance losses can therefore rise even when changes in the hazard itself do not explain the entire increase.

Vulnerability

Two homes exposed to the same storm may not experience the same damage. Roof condition, construction, drainage, building systems, maintenance, and mitigation measures can influence how a property performs.

Planning note: Climate risk and rebuilding inflation can increase insurance pressure at the same time. Higher labor and material costs can make the same physical damage more expensive to repair.

Is Climate Change Really Affecting Home Insurance Premiums?

The Bottom Line: Yes, there is strong evidence connecting climate-related property risk with insurance costs and availability—but climate change should not be presented as the sole cause of every premium increase.

The U.S. Treasury's Federal Insurance Office analyzed more than 246 million homeowners insurance policies from more than 330 insurers, aggregated at the ZIP-code level from 2018 through 2022.

Average homeowners premiums increased 8.7% faster than inflation during that period. Homeowners in the 20% of ZIP codes with the highest expected annual building losses from climate-related perils paid an average premium of $2,321—82% more than homeowners in the lowest-risk 20%.

Average nonrenewal rates were also approximately 80% higher in the highest-risk ZIP codes.

Important limitation: Treasury's climate-risk analysis excluded flooding and earthquakes. Flooding is generally excluded from standard homeowners insurance, while earthquakes are not climate-related hazards.

How Much Have Home Insurance Premiums Increased?

The Bottom Line: There is no single correct percentage because major insurance studies measure different homeowners, markets, and time periods. What they consistently show is substantial recent cost pressure.

Consumer Federation of America estimated that typical homeowners premiums increased 24% nationwide between 2021 and 2024, adding about $648 annually for a typical homeowner in its analysis.

Premiums increased in approximately 95% of U.S. ZIP codes.

The NAIC provides a different measure. Its August 2026 analysis found that average premium per policy increased in every U.S. region from 2018 through 2024. After inflation, increases ranged from 18.3% to 43.3%, depending on region.

How Much Have Home Insurance Premiums Increased in Illinois?

The Bottom Line: Illinois stands out nationally. Consumer Federation of America estimated that typical homeowners insurance premiums increased approximately 50% from 2021 through 2024.

That was the second-largest percentage increase among states in CFA's analysis.

The figure does not mean every Illinois homeowner experienced a 50% increase. It also does not mean climate change caused the entire increase.

Individual premiums depend on the property, insurer, location, amount of coverage, deductible, construction, building condition, and other underwriting factors.

Chicago buyer takeaway: Use statewide numbers as context. Use the actual property address and an insurance quote for the real affordability calculation.

What Weather and Climate Risks Matter in Chicago?

The Bottom Line: Chicago's risk profile is different from hurricane-prone Florida or wildfire-prone parts of California. Heavy rainfall and urban flooding are among the locally important issues buyers should understand.

Chicago's extensive pavement and built environment can limit how quickly rainfall is absorbed, while intense storms can put significant pressure on sewer and drainage infrastructure.

A WBEZ/Chicago Sun-Times investigation reported that at least 70,000 West Side and suburban basements flooded after severe rainfall during the summer of 2023.

For buyers evaluating a Chicago property—particularly one with a basement or garden-level space—water history and drainage deserve serious due diligence.

Can a Chicago Home Flood Even If It Isn't in a High-Risk Flood Zone?

The Bottom Line: Yes. Being outside a mapped high-risk flood area does not mean a property cannot experience flooding or other water intrusion.

Urban flooding can occur when intense rainfall exceeds the capacity of local drainage and sewer infrastructure. Buyers should therefore evaluate the property itself, not rely only on a flood-zone designation.

• Ask whether water has previously entered the basement.
• Investigate any history of sewer backup.
• Review exterior grading and drainage.
• Confirm gutters and downspouts are functioning properly.
• Inspect the sump pump and any backup system.
• Review past foundation or drainage repairs.

Does Standard Homeowners Insurance Cover Flooding?

The Bottom Line: Generally, no. Flood damage is not covered by a standard homeowners policy. Separate flood insurance is available through the National Flood Insurance Program and private insurers.

This matters in Chicago because not every water-loss scenario is treated the same way.

Surface flooding, sewer backup, sump-pump problems, plumbing failures, and roof leaks can receive different treatment under an insurance policy.

Why Should Buyers Compare Deductibles, Not Just Premiums?

The Bottom Line: The annual premium tells you what insurance costs. The deductible helps tell you how much financial risk you may retain when a covered loss occurs.

A cheaper policy is not necessarily the better financial fit if it carries a substantially larger deductible or materially different coverage.

• Annual premium
• Standard deductible
• Any separate wind, hail, or other hazard deductible
• Whether deductibles are fixed-dollar or percentage-based
• Dwelling coverage
• Replacement-cost terms
• Exclusions
• Coverage limits
• Relevant endorsements

Key comparison: Don't compare policies on price alone. Compare how much risk remains with the homeowner, too.

How Can Rising Insurance Costs Affect What You Can Afford?

The Bottom Line: Insurance is part of the total cost of owning a home. A home that fits your purchase-price budget may look different once insurance and other recurring expenses are included.

Swipe left or right to view the full table.

Purchase price tells you what it costs to acquire the property. Total cost of ownership tells you more about what it may cost to live there.

Can Home Insurance Affect a Mortgage or Closing?

The Bottom Line: Yes. Mortgage lenders generally require appropriate property insurance, so insurance availability and cost can become part of the financing and closing process.

Insurance affordability

Appropriate coverage is available, but the cost strains the buyer's budget.

Insurance availability

Obtaining suitable coverage itself becomes difficult.

Either can complicate a transaction. The practical response is to investigate insurance early enough that the answer does not arrive as a surprise shortly before closing.

Should You Get an Insurance Quote Before Making an Offer?

The Bottom Line: Buyers should investigate property-specific insurance costs as early as practical, especially when a property's age, condition, location, roof, water history, or building systems could affect underwriting or affordability.

• Can this property currently be insured?
• What is the estimated annual premium?
• What deductible applies?
• Are there separate hazard deductibles?
• Does roof age or condition affect the quote?
• Do older electrical, plumbing, or heating systems affect underwriting?
• Are there important exclusions or limitations?
• Is replacement-cost coverage available?
• Should separate flood insurance be considered?
• What mitigation measures does the insurer recognize?
• What could cause the quote to change before coverage is bound?

What Should Chicago Buyers Check When a Home Has a Basement?

The Bottom Line: A basement adds another layer of water-risk due diligence, especially given Chicago's history of intense rainfall and sewer-system pressure.

• Previous basement flooding or seepage
• Visible moisture or staining
• Sump-pump condition
• Backup power for the sump system
• Sewer-backup protection
• Foundation condition
• Exterior grading
• Gutters and downspouts
• Drainage improvements
• Previous water-related repairs
• Insurance options for relevant water risks

Can Home Improvements Lower Insurance Costs?

The Bottom Line: Potentially, but buyers and homeowners should never assume an improvement will produce an insurance discount. Eligibility and discounts vary by insurer and property.

1. Identify the property's condition or risk issue.
2. Ask the insurer whether it affects underwriting.
3. Ask which improvements the insurer recognizes.
4. Confirm whether the improvement would affect eligibility or price.
5. Evaluate the project based on the home's overall needs—not the insurance discount alone.

Could Rising Insurance Costs Affect Home Values?

The Bottom Line: Potentially, especially where insurance costs or availability materially change the cost of owning property. But the effect varies by market, and national research should not be converted into a prediction about a specific Chicago property.

A household has a finite housing budget. If taxes, insurance, or other recurring expenses consume more of it, less may be available for principal and interest.

Better question: Is insurance materially changing the affordability or marketability of this particular property?

What Is Illinois Doing About Home Insurance Rates?

The Bottom Line: Illinois enacted a significant insurance-rate law in August 2026. Relevant provisions are scheduled to take effect July 1, 2027.

Governor JB Pritzker approved HB 4273, now Public Act 104-0752, on August 4, 2026.

Among other provisions, the law establishes standards stating that covered fire and extended-coverage insurance rates may not be excessive, inadequate, or unfairly discriminatory. It also creates a regulatory review framework and requires at least 60 days' notice for certain renewal premium increases greater than 10%.

Regulatory note: The law does not mean premiums cannot increase, and statutory exclusions apply to some categories of property coverage. Because implementation begins in 2027, homeowners should verify current requirements with the Illinois Department of Insurance.

Common Questions From Chicago Buyers

“Chicago isn't Florida. Why should I worry about this?”

You should not treat Chicago like Florida. The two markets have different hazards, housing stock, insurance conditions, and regulatory environments.

But Illinois' recent premium growth and Chicago's experience with intense rainfall show why insurance deserves attention here too. The goal is not to worry about insurance. It is to price it into the decision.

“Can't I just use an online average?”

An average can provide context, but it cannot replace a property-specific insurance quote. Construction, age, condition, coverage, deductible, and other property-level factors can affect pricing.

“Does a higher insurance quote mean I shouldn't buy the home?”

Not necessarily. It means you have another cost to investigate. Insurance should inform the decision—not automatically make the decision.

What Should Chicago Homebuyers Take Away?

The changing insurance market adds another layer to homebuying, but the response does not need to be fear or guesswork.

It should be better due diligence.

Federal data shows a meaningful relationship between climate-related property risk and insurance costs. National regulators report substantial premium and nonrenewal increases. Illinois has experienced unusually large recent premium growth. Chicago's recent flooding also demonstrates that local weather and infrastructure risks deserve attention.

Bring the conversation back to the property:

• What will it cost to insure?
• What is the deductible?
• What isn't covered?
• Has the property experienced water problems?
• What condition is the roof in?
• How does insurance change the total cost of ownership?