Homeowners in South Dakota are facing significantly higher insurance premiums, with rates increasing faster than in most neighboring states due to severe weather conditions and the rising cost of rebuilding, according to a report by the Federal Reserve Bank of Minneapolis.
The Federal Reserve Bank of Minneapolis, citing data from S&P Global, reported that the average annual premium for homeowner’s insurance in South Dakota has risen by 41% over the past seven years. This increase surpasses the national average of 34% during the same period, while inflation has only risen by 24%.
Although Minnesota and Montana, also within the Ninth Federal Reserve District, saw premium increases above the national average, they were not as pronounced as those in South Dakota. According to the Federal Reserve Bank of Minneapolis, catastrophic weather events are a primary driver of these premium hikes in the Upper Midwest, including South Dakota, Minnesota, and Montana.
The report highlighted that nearly half of the United States’ 19 “billion-dollar storms” in 2023 occurred in states within the Ninth District. The frequency of severe weather events such as wind and hailstorms, exacerbated by rising construction costs due to inflation, is significantly impacting insurance premiums in the region.
While South Dakota’s average annual premium of $2,455 is lower than states like Nebraska ($4,745), Kansas ($4,072), and Oklahoma ($4,565), as reported by Bankrate in 2024, the rapid increase is a concern. These neighboring states experience more frequent tornadoes and hail, contributing to their higher average premiums.
South Dakota’s insurance market is further affected by the high frequency of crop insurance payouts due to extreme weather conditions. Between 2001 and 2022, farmers in the state received nearly $10 billion in payouts from the Federal Crop Insurance Corporation for weather-related disasters such as drought, excess moisture, and hail.
Anne Schechinger, Midwest director for the Environmental Working Group, noted a strong correlation between the rising crop insurance payouts and the increasing impacts of climate change. “We’re very confident there’s a strong connection to climate change here because farms are some of the businesses most vulnerable to climate change,” Schechinger said in an interview with South Dakota News Watch.
The rising cost of insurance affects both urban and rural communities in South Dakota. Higher premiums translate to higher monthly costs for families across the state, from Sioux Falls to Rapid City. This increase can be particularly challenging for individuals on fixed incomes.
The trend of rising insurance costs in South Dakota is expected to continue as extreme weather events become more frequent, according to the Federal Reserve Bank of Minneapolis. This ongoing increase will directly impact the monthly budgets of homeowners, renters, and farmers across the state.
