Homeowners insurance is reshaping the real estate transaction

Securing homeowners’ insurance is reshaping the homebuying process itself. Premiums are rising, carriers are pulling back from entire states and buyers are increasingly discovering, sometimes days before closing, that the home they plan to purchase is either too expensive to insure or cannot be insured at all. What was once a routine, last-step check is now introducing unnecessary uncertainty into the transaction. 

These challenges are doing more than delaying closings. Millions of homeowners are uninsured, underinsured or completely priced out of securing coverage. Homeowners insurance premiums rose 8.5% in 2025 after an 18% increase in 2024, pushing average annual costs to record levels.  As costs climb, it becomes a key factor in whether a deal will move forward at all. 

Builders face a new transaction risk

For builders, this creates a new layer of operational risk that cannot be solved at the eleventh hour. Insurance has traditionally been treated as a downstream task, handled late in the process after financing is secured. But in today’s lending environment, that approach is breaking down. Rising insurance costs are beginning to affect borrower qualification, increase debt-to-income ratios and, in some cases, push borrowers out of eligibility entirely. 

The solution is not simply better access to insurance, but a shift in when and how insurance enters the transaction. Integrating insurance earlier in the homebuying process is emerging as a practical way to reduce the friction found later on. By surfacing coverage options and potential insurability issues up front, builders can create a more predictable experience for buyers and avoid last-minute surprises that derail deals.

According to Zillow, 15% of individuals asked about buying a home said they were looking for home insurance as one of their first three steps. This disconnect highlights how misaligned the traditional process has become with the current realities for homebuyers. 

With a more proactive model, builders can work with an experienced insurance agency to pre-underwrite properties and generate home insurance quotes earlier in the purchase journey. This approach flags potential insurability issues upfront before they become closing-day surprises. 

At the same time, price volatility is changing consumer behavior, with more homeowners actively shopping for new policies and reevaluating coverage as premiums rise year over year. 

This is especially important in new construction, where first-time buyers are often navigating the process and rely heavily on the builder’s partner ecosystem. Access to insurance guidance at the point of purchase can help buyers make more informed decisions and give builders greater confidence that transactions will proceed as planned. 

“Westwood Insurance Agency brings real market breadth to a process that has historically offered homebuyers little choice and even less transparency,” said Tom Kriby, VP of Client Development and Partnerships at Westwood Insurance Agency. “The result is a smoother transaction for buyers, builders and lenders alike.” 

That depth of knowledge is increasingly important as the insurance market fragments. No single carrier can consistently provide competitive coverage across all risk profiles and regions. Therefore, a more integrated model, one that connects builders, agencies and multiple carriers earlier in the process, allows for greater flexibility and visibility. 

The competitive advantage of proactive partnerships

For lenders and builders alike, this shift is less about convenience and more about risk management. “The availability and affordability of coverage has become a material factor in transaction outcomes and customer experience,” said Kriby. “The organizations that navigate this environment most effectively are those that are building the right partnerships and thinking proactively about how to reduce insurance-related friction in the journeys their customers are taking.”

Rising rebuilding costs are up nearly 30% over the past few years, and are continuing to pressure premiums and reshape the underwriting standards across the market. For builders operating anywhere in the financial services ecosystem, the takeaway is clear. More than half of buyers are reporting that insurance is a contingency in their final offer. Homeowners insurance can no longer be left as the final box to check at the end of the transaction. Coverage availability and affordability are now directly shaping whether deals move forward, how smoothly they close and how buyers experience the process.

The builders who will navigate this environment most effectively are not reacting to insurance challenges at closing. They are building the right partnerships, integrating insurance earlier into their workflows and proactively reducing friction before it reaches the buyer. With premium growth expected to remain elevated due to risks such as climate change, inflation and rebuilding costs, insurers are expected to continue to adjust pricing and availability well into 2026.  In a market where certainty is harder to secure, the shift toward integrating insurance earlier in the homebuying process is not just operational. It is a competitive advantage.