Home Insurance Claim Severity Reaches Record Levels In 2026
Our friends at PIA Southern Alliance shared an article by Maura Keller, a Minnesota-based freelance writer and editor. It’s worth discussing today.
New analysis from LexisNexis Risk Solutions highlights a changing landscape for the U.S. home insurance market, with insurers facing fewer claims overall but significantly more expensive losses when claims do occur. Claim frequency across all perils declined sharply in 2025, continuing a trend that has persisted since the COVID-19 pandemic, according to the company’s 2026 U.S. Home Trends Report. However, the cost of individual claims reached its highest level in the seven-year period examined, underscoring the growing financial impact of severe weather events, inflation, and rising rebuilding costs. While overall loss costs decreased modestly from 2024, the report found that costs remain substantially higher than they were in 2019.
Increased claim severity largely offsets the benefits of fewer claims, creating ongoing challenges for insurers as replacement costs continue to climb. Fire and lightning emerged as the most significant drivers of losses in 2025. LexisNexis attributes much of that increase to the devastating Los Angeles wildfires, which contributed to a sharp rise in both claim severity and overall loss costs for the peril. The report notes that the wildfire became the costliest in U.S. history, illustrating how climate-related catastrophes continue to reshape the risk environment for homeowners and carriers alike.
Although catastrophe-related claims declined in 2025, helped by the absence of a continental U.S. hurricane landfall during the Atlantic hurricane season, the year still included numerous costly weather events. The report points to 23 separate weather and climate disasters that collectively caused an estimated $115 billion in damage nationwide, including major tornado outbreaks and wildfires. The report also mentions notable regional differences. While California recorded the greatest wildfire-related losses, Nebraska experienced the highest overall loss cost across all perils over the seven-year study. And beyond weather-related events, LexisNexis notes that non-weather water damage remains one of the most preventable sources of insurance losses. Overall, the findings suggest that even as claim frequency declines, the increasing severity of losses continues to place pressure on homeowners and the property insurance industry, reinforcing the need for improved risk mitigation and long-term resilience.
There is nothing really new in this article; claim frequency is down, largely driven by the lack of a significant Hurricane event, but claim severity is up. One point the article doesn’t really address is that general inflation has increased since COVID; material costs are substantially higher than pre Covid. For example, I was looking at a minor interior partition in my office pre-Covid, when I actually got around to doing it after COVID, the costs of the 2x4s and trim for the job had changed from about $100 to nearly $700. Home costs have skyrocketed in this area compared to pre Covid. In addition to the above, the available labor supply has shrunk dramatically. Labor rates are up significantly. So yes, the number of claims is down, but each claim is costing more.
The important question: how, as a homeowner, do I deal with this? I’d suggest a couple of things:
1- Consider larger deductibles. Go from the common $1000 deductible to a $ 2,500 or $ 5,000 deductible. The average home has a claim every 7 years. Factor that into your calculations. Is a $10,000 deductible actually a good way to save money?
2- Consider dropping the replacement cost coverage for your contents. The most common contents loss is theft. If you’re retired now and spend most of your days at home, especially if you have an alarm system, it is something to consider.
3- Look at packaging your auto and home coverages with the same company. Recognize that longevity with a carrier does have value when a carrier is looking to reduce their writings in a certain class of business.
4. Be sure to tend to any maintenance issues around your home, cut any overhanging trees, make sure gutters and downspouts are clear, trim bushes along sidewalks and pathways. Keep your grass cut, and make sure gates, fences, and exterior lights are in good repair. Get rid of any junked cars. Consider alarm systems for water and burglary issues. Is it time to repaint your outside?
In the face of rising costs, it’s important to prepare if you want to protect what matters to you.
Take care,
Chris
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