Why Property Owners Are Struggling in Today's Market

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Key Takeaways

- Climate change is driving a sharp rise in rental property insurance premiums, putting pressure on landlords’ margins and long-term returns.

- As risks increase and coverage tightens, adapting through smarter risk management and cost strategies is becoming essential for staying profitable.

For landlords in 2026, the steady climb in insurance premiums is no longer an isolated financial annoyance — it’s a direct reflection of intensifying climate risks. Hurricanes, wildfires, floods, hailstorms and other climate-driven disasters have pushed premiums upward for nearly all types of property insurance. As premiums rise, profits decline, leaving landlords in high-risk and historically low-risk regions alike questioning how long they can reasonably absorb these shocks.

Landlords are not alone. Homeowners across the country have watched their own insurance premiums rise rapidly since the late 2010s, raising the overall cost of housing. But while homeowners can partially offset these costs through sales timing or by relocating, landlords face a structurally different problem: Insurance expenses directly erode net operating income and reduce property profitability year over year.

The difficulty has become so pronounced in some states that obtaining coverage at all — let alone at a sustainable rate — is becoming a challenge.

In many markets, insurers are pulling back coverage, raising deductibles or exiting entirely. This leaves landlords paying more for less, introducing uncertainty into investment strategies and long-term planning. This financial pressure is showing up in rental markets, influencing negotiations around rents, landlord operating decisions and even local housing supply.

What’s typically covered in landlord insurance?

Landlord policies provide dwelling coverage for structural damage, liability protection for accidents, and optional coverage — such as flood insurance — in high-risk areas.

Because climate risks are shifting quickly, policies that seemed proportional just a few years ago may no longer reflect current exposure, requiring a frequent review to avoid gaps that could become costly during a claim.

The rise of rental property insurance premiums over time

Insurance premiums have outpaced inflation, a trend deeply tied to climate volatility. The Treasury Department reports that between 2018 and 2022, home insurance prices rose roughly 8% faster than overall inflation — a growth rate that translates to shrinking profit margins for landlords who rely on stable operating expenses to project returns.

While coastal markets have grappled with high premiums for decades, the inland surge is new. Those in the Great Plains, for example, have seen dramatic hikes due largely to hail damage. In 2024 alone, hailstorm-related losses reached $54 billion in insured claims.

Nebraska now reports average homeowners’ premiums near $6,400 — the highest in the country — and similar patterns are emerging in multifamily and investment rental portfolios. For landlords, this means higher operating costs with no guarantee that rents can or will rise enough to maintain margins.

What’s driving the spike in insurance costs?

Climate change and catastrophic weather exposure:

Extreme weather events now occur more frequently and cause more damage, raising claim costs and prompting insurers to adjust premiums aggressively. From hurricane-prone coasts to the wildfire-prone West, insurance carriers are recalibrating risk models — and landlords are footing the bill through higher premiums and narrowed coverage.

When insurance becomes costlier and less comprehensive, landlords’ profit margins contract. For some, that means absorbing losses. For others, it means attempting rent increases that may or may not be supported by local markets.

Rising property values and rebuilding costs:

Inflation in building materials and labor has raised the replacement cost of damaged properties. Higher replacement values mean insurers must carry more risk, and those additional costs cascade down to policyholders. For landlords, high replacement costs translate directly into steeper premiums and reduced net operating income.

Supply chain disruptions and inflation:

Repair timelines and materials shortages increase claim payouts, further pressuring insurers. These same forces already raise landlords’ capital expenditures, creating a dual squeeze: Rising maintenance costs and rising insurance costs simultaneously eat into profit margins.

Liability exposure in rental markets:

Liability is also becoming more expensive. Tenant protections, litigation risk and higher defense costs have made liability premiums harder to control. Even when landlords avoid liability judgments, legal fees ripple through premium pricing. Again, these expenses reduce profitability before rent adjustments can compensate.

Reinsurance costs:

Rein