The home insurance crisis is deepening, forcing homebuilders to rethink how they design, price, and protect their homes. Rising premiums, market exits by major insurers, and climate-driven risks are reshaping affordability and, in many cases, insurability.

Alan Umaly, President of Westwood Insurance Agency, and Naimish Patel, President of Personal Lines at MSI, a leading managing general agency that functions like an insurance company, sat down with The Builder’s Daily to outline what’s happening and what homebuilders need to do. Westwood is the exclusive distributor of MSI’s new construction homeowners insurance product and specializes in insuring new construction homes.  

Their message is clear: insurance is now a front-end issue for homebuilders, not a last-minute hurdle. Builders who adapt quickly—by designing for resilience, integrating data, and collaborating with an experienced insurance agency—will gain a competitive edge. Those who don’t will face growing uncertainty.

The Breaking Point

The home insurance market faces unprecedented challenges, creating new obstacles for homebuyers and builders. Over the past few years, rising claims costs, natural disasters, and economic pressures have led to significant financial losses for insurers. As a result, major carriers have pulled out of high-risk states, tightened underwriting guidelines, and raised premiums.

For builders, these shifts mean their buyers may struggle to secure affordable coverage or even find coverage, resulting in delayed closings or no sale. This is no longer just a buyer problem. It’s a business problem.

The home insurance market is evolving, and builders who take a proactive approach can turn these challenges into a competitive advantage,” Patel says.

Homes Must Be Built for Resilience

Buyers are paying attention. A decade ago, climate risk wasn’t top of mind when purchasing a home. Now, it’s a factor in nearly every conversation. Wildfires, hurricanes, and flooding have reshaped the market, and builders need to follow suit.

Homebuilders can help protect their buyers from rising insurance costs—and even the unavailability of insurance in some areas—by building more resilient homes,” Umaly says. “Consumers want homes built to withstand the realities of climate change.”

That means fire-resistant materials, flood-resistant designs, and smart water mitigation systems. Umaly expects resilient construction to become the industry standard, not a niche feature.

Data Is Driving the Future of Insurance

Insurers now have more information on homes than ever before. Advanced analytics help them predict risk, spot trends, and set prices based on real data rather than broad regional assumptions. For homebuilders, that data matters.

Home insurance has become an extremely data-driven business,” Patel explains. “For example, water damage is one of the most significant loss factors, and companies are using analytics to assess plumbing types and safety devices, like whole-house water shutoff systems, which can dramatically reduce claims.”

Builders who work with an insurance agency specializing in new builds to understand these insights will be better positioned to lower costs for buyers.

Collaboration Is No Longer Optional

The growing cost of insurance is reshaping the total cost of homeownership. In some markets, insurance is as expensive as property taxes. That’s a problem for affordability, and Umaly argues that builders need to get ahead of it.

Now more than ever, homebuilders must collaborate with an experienced insurance agency to truly understand the cost of homeownership,” he says. “Small, upfront design changes—like fire-resistant materials or advanced leak detection—can lead to immediate and significant reductions in insurance premiums, making homeownership more affordable.”

Builders who make these adjustments early will have a significant advantage in keeping homes insurable.

Insurability Is a Game-Changer

Uncertainty kills deals. Buyers who discover late in the process that their home’s insurance costs are unexpectedly high—or that coverage is unavailable—may walk away.

One of the ways Westwood delivers certainty in this volatile market is by working with builders to embed home insurance early in the buying process,” Umaly says. “When a customer gets a quote from us, they know there won’t be any last-minute surprises that could derail their home purchase.”

That stability is as critical for builders as it is for buyers. Eliminating unknowns helps ensure deals close.

Expanding Solutions for High-Risk Markets

As traditional insurers retreat from high-risk states, buyers and builders are turning to Excess & Surplus (E&S) insurance. Unlike standard policies, E&S products offer flexibility in regions where insurers have pulled back.

Right now, we’re proud that we can still offer coverage in places where major insurers have pulled out,” Umaly says. “That stability is invaluable for homebuilders.”

It is essential for builders in high-risk regions to work with an insurance agency partner like Westwood. Founded more than 70 years ago, Westwood collaborates with many of the top builders to offer home insurance to their customers nationwide.  

Water Damage Is a Preventable Cost

Water damage is a leading cause of insurance claims. The good news? It’s preventable.

Patel highlights whole-house water shutoff systems as one of the most effective tools available. These systems detect leaks and shut off water before major damage occurs.

Since water losses make up a huge portion of insurance claims, installing these systems in new homes could dramatically reduce premiums and improve insurability,” Patel explains.

Builders who integrate this technology could gain favor with insurers and lower costs for buyers.

Fire-Resistant Materials Are Becoming Standard

Building materials matter more than ever in insurance underwriting. In wildfire-prone areas, insurers are adjusting their risk models based on construction choices.

In wildfire-prone areas, we’re seeing a push toward cement fiberboard siding instead of wood,” Patel says. “And I expect this to become a widespread standard in high-risk regions.”

Builders who make these choices proactively will position their homes as more insurable.

Community Design Can Help Lower Risk

Individual home features matter, but broader community design also plays a role. Fire-prone areas need defensible space, and flood-prone regions require better drainage planning.

Wildfire mitigation isn’t just about the home itself—it’s also about the surrounding environment,” Patel says. “Thoughtful use of non-combustible vegetation, better home spacing, and defensible perimeters can all help reduce wildfire risk and keep insurance costs down.”

Builders should engage with an experienced insurance agency early in the planning stages—not just at the individual home level, but at the community level.

New Realities Mean New Rules

Umaly and Patel’s insights clearly show that the home insurance landscape is changing, and homebuilders must adapt. Those who get ahead of these shifts will gain a competitive edge. Those who ignore them will face growing uncertainty.

Here’s what builders need to do:

• Make resilience a priority. Buyers expect homes built for climate realities, and insurers are rewarding builders who incorporate fire-resistant materials and smart water systems.
• Work with an experienced insurance agency specializing in new home construction. Homebuilders who collaborate on risk mitigation strategies will help ensure homes remain insurable and affordable.
• Embed insurance into the sales process.  Incorporating home insurance early in the homebuying journey can prevent last-minute surprises that threaten deals.
• Prepare for new underwriting standards. Materials, water systems, and climate-conscious designs will increasingly determine home insurability.
• Think beyond the house. Community-wide planning—such as fire mitigation strategies and flood prevention—can lower risk and insurance costs.

The High Level

Insurance is no longer a back-end concern. It’s a front-end, strategic issue that homebuilders must account for from day one. The old way of doing business—building homes and leaving insurance as a buyer problem—is no longer viable.

The future belongs to builders who embrace resilience, data, and collaboration. Those who do will not only protect their buyers but also their own bottom line.