North Carolina homeowners can expect to see a significant increase in their insurance premiums over the next few years, following a recent settlement between the state’s Insurance Department and the insurance industry. The base rates for homeowners’ insurance will rise by an average of 15% by mid-2026, a move that comes after a lengthy legal process and disagreement over the size of the increase. The settlement is aimed at ensuring that insurance companies remain financially stable and able to cover the increasing costs of claims following natural disasters.
The Dispute and Settlement Background
The settlement announced by North Carolina Insurance Commissioner Mike Causey contrasts sharply with the original proposal made by the North Carolina Rate Bureau in January 2024. The Rate Bureau, which represents the state’s insurance companies, had initially requested a staggering 42.2% overall increase in insurance premiums, citing factors such as inflation, rising building material costs, and an increasing number of natural disasters.
Causey, who began his third term as Insurance Commissioner in January 2025, formally rejected the Rate Bureau’s request last year. His rejection prompted a formal hearing that began in October 2024, which featured testimony from multiple witnesses, evidence, and arguments. The state Insurance Department’s position during the hearing was that rates should either be lowered or increased by no more than 3%.
As part of the agreement, the insurance rate increases will occur in two phases, starting in June 2025 and continuing in 2026. The average rate increase for homeowners will be 7.5% in June 2025 and another 7.5% in June 2026. This means that by mid-2026, homeowners will experience an average 15% increase in their premiums.
Reasons Behind the Increase
The insurance rate increases come after years of escalating costs due to natural disasters and inflation. According to the North Carolina Insurance Department, the increases are necessary to ensure that insurance companies remain financially viable in the face of rising claims from natural disasters, such as hurricanes and floods. In addition, the cost of reinsurance—insurance that companies buy to cover their own losses from catastrophic events—has risen significantly, further driving up costs.
The Rate Bureau’s request for a 42.2% increase was based on the argument that the current premium rates were insufficient to cover the growing costs of claims. In particular, the bureau pointed to the impact of inflation, especially on building materials, which has made repairs and rebuilding efforts more expensive. Additionally, the rising frequency of severe storms and flooding has placed further strain on insurance companies’ ability to pay claims.
The settlement acknowledges the need for increased rates but brings the average increase down to a more manageable level, while also taking into account the varying levels of risk in different regions of the state.
Regional Variations in Rate Increases
The rate increases will not be uniform across North Carolina. Certain areas of the state, particularly those that have been severely impacted by past natural disasters, will see higher-than-average increases. For example, parts of eastern North Carolina, including areas devastated by Hurricane Matthew in 2016 and Hurricane Florence in 2018, will see a substantial rise in premiums. Coastal regions, such as Carteret and Brunswick counties, will experience an average 16% increase in mid-2025, followed by an additional 15.9% increase in mid-2026.
On the other hand, areas that were less affected by flooding and hurricanes will see smaller increases. For instance, regions such as Buncombe, Watauga, and Yancey counties, which were impacted by historic flooding from Hurricane Helene in 2018, will have much lower premium increases. These areas are expected to see base rates increase by just 4.4% in 2025 and 4.5% in 2026.
In more densely populated cities, such as Raleigh, Durham, and Charlotte, the average increases will be slightly higher. In Raleigh and Durham, base rates will rise by 7.5% each in 2025 and 2026. In Charlotte, premiums will increase by 9.3% in 2025 and 9.2% in 2026.
Impact on Homeowners and Future Projections
The agreed-upon increases are expected to help ensure that insurance companies in North Carolina remain financially secure and capable of covering claims. While homeowners may feel the financial strain of higher premiums, the state’s Insurance Department argues that these increases are necessary to maintain the stability of the state’s insurance market.
One key aspect of the settlement is the agreement that the Rate Bureau will not seek further rate increases before June 2027. This provides a degree of stability for homeowners, who can now plan their budgets with some degree of certainty over the next few years.
However, it remains to be seen how homeowners will respond to the increased premiums. In particular, homeowners in regions most affected by natural disasters may find it more difficult to afford their insurance premiums, potentially leading to a rise in underinsurance or the need for government intervention.
Looking Ahead: Balancing Risk and Affordability
The situation in North Carolina highlights the delicate balance that must be struck between ensuring insurance companies can cover claims and keeping premiums affordable for homeowners. With the increasing frequency and severity of natural disasters, it is likely that other states will face similar challenges in the coming years. The situation calls for ongoing collaboration between regulators, insurance companies, and homeowners to ensure that the insurance market remains stable while also offering coverage that is affordable and accessible.
As North Carolina moves forward with these rate increases, policymakers and industry leaders will need to keep a close eye on the financial health of both homeowners and insurance companies. While the rate increases may be necessary to maintain the industry’s solvency, there is a risk that the financial burden on homeowners could become untenable, particularly in the hardest-hit areas of the state.
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