Podcast Summary: NerdWallet's Smart Money Podcast

Episode: Home Insurance Rate Increases and Psychological Traps That Are Costing You

Date: February 23, 2026
Hosts: Sean Pyles, CFP® & Elizabeth Ayoola, with guest Caitlin Constantine

Overview

In this episode, NerdWallet’s financial experts dig into two timely topics:

1. Behavioral financial biases—the “psychological traps” that cause people to lose money despite their best intentions, and
2. The impact of climate change on home insurance rates and home ownership decisions, answering a listener’s question about rising home insurance expenses and the broader implications for potential buyers and renters.

Listeners receive actionable advice with the signature Smart Money wit and transparency, equipping them to recognize unhelpful financial behaviors and to better navigate the changing landscape of housing and insurance in a warming world.

1. Behavioral Financial Biases: How Your Brain Tricks You Out of Money

(00:49 – 16:14)

Key Discussion Points

• Introduction to Behavioral Finance and Financial Biases

  • Behavioral finance explores how emotions and biases shape money decisions.
  • “We are highly irrational animals, Elizabeth. We're basically right out of the jungle throwing money at whatever looks shiny and nice to us.” — Sean (02:13)

• Core Biases That Cost You Money

  • Loss Aversion:
    • Losing money hurts more than gaining the same amount feels good.
    • Example scenario: Holding onto a plummeting stock purely to avoid realizing a loss, even as logic says to cut it loose.
    • “When it comes to loss aversion, selling your stocks at a loss can be a really smart financial move, because… that can help you offset your gains through a little something called tax loss harvesting.” — Sean (04:27)
  • Herd Mentality:
    • Following popular trends without personal research; leads to risky investments (e.g., the NFT or GameStop frenzies).
    • “If they see people panicking and selling their investments, other folks might want to jump on the bandwagon and do the same. And this can be a big money loser…” — Sean (05:50)
  • Overconfidence Bias:
    • Believing you're more skilled at investing or managing money than you really are.
    • Impacts not just “finance bros,” but anyone who underestimates risk—or skips things like insurance.
    • “You could just be really confident that you will never face an accident… So why bother getting insurance at all? And then guess what? Life happens.” — Sean (07:23)

• How to Combat These Biases

  • Slow down before making financial decisions.
  • Self-reflect: Are you chasing trends or betting on your own skill?
  • Consult others with experience.
  • “To overcome overconfidence bias, humble yourself. And I mean that in the nicest way.” — Elizabeth (08:09)

Notable Quotes & Memorable Moments

• “Frictionless habits die hard. There's a reason why all of these tech companies are making it frictionless for us to spend our money—because it's super easy to use it and it makes you go back for more and more.” — Sean (14:30)
• Listener finance challenge check-in:
  • Elizabeth considers breaking her “no-spend month” with a $900 laser hair removal, rationalizing (or “girl mathing”) it as cheaper than razors for life.
    • “So I'm going to become a hairless cat. Okay, that's too much information.” — Elizabeth (10:31)
  • Sean tries a cash-only spending week:
    • “It made me feel more accountable to myself… even though you— we live in a very largely cashless society.” — Sean (13:32)
    • Realization: Cash feels like “already spent money,” but using it brings awareness.

2. Climate Change, Home Insurance, and the New Calculus of Homeownership

(17:37 – 35:06)

Listener Question (17:43)

“How is climate change affecting the calculus of whether or not to buy a home as insurance coverage availability and home expenses shift? For reference, I live in the Twin Cities in Minnesota—so not rising sea levels, but tornadoes, high winds and hail seem to be becoming more problematic.”

With Featured Guest: Caitlin Constantine, Editor & Content Strategist

Recent Changes & Trends

• Weather Events Are Evolving

  • Shift from billion-dollar hurricanes/wildfires to more frequent localized events (tornadoes, severe thunderstorms, hail).
  • Hail: “Extreme hail storms in particular are becoming more common and the costs associated with hail damage are becoming bigger along with the frequency.” — Caitlin (18:47)

• Rising Insurance Costs

  • Home insurance up 24% nationwide from 2021–2024; even higher in some states (Utah, Illinois, Arizona). (19:46)
  • Nearly all ZIP codes (95%) saw increases.
  • “The impact isn't localized like it used to be. Like we're all feeling it.” — Caitlin (19:55)

• Effect on Homebuyers

  • 15% of non-homeowners say insurance costs are stopping them from buying. (20:32)
  • Growing number of owners (esp. those without mortgages) are forgoing insurance entirely:
    • “One out of every seven… homeowners in the United States are going without home insurance.” — Caitlin (21:14)

• Market Adaptations and Risks

  • Large insurers reducing or ending coverage in high-risk areas (ex: California, Florida).
  • “States that have availability issues are starting to force more and more homeowners onto these state run… insurers of last resort. They're called FAIR plans… they tend to be more expensive and they provide less coverage.” — Caitlin (22:03)

Impact on the Housing Market

• Escrow Burden:

  • Escrow payments (insurance + taxes) are up 45% in five years.
  • Escrow sometimes even more than the mortgage payment itself. (24:05)

• Construction Industry Changes

  • More homes being built with climate resilience in mind:
    • Impact-resistant roofs and windows; fire- and flood-resistant materials.
    • Energy efficiency now among the top five homebuyer desires.
    • “Four of the top five trends in homes are currently tied to energy efficiency and stability.” — Caitlin (25:15)

Advice for Buyers & Renters

• Homebuyers

  • Don’t assume insurance/taxes will remain stable; build future increases into your budget.
  • Research climate risk for any property—try tools like First Street (risk ratings by address).
  • Consider climate resilience upgrades and ask insurers about discounts for mitigation.
  • “Assume that you are going to end up paying more in escrow than you are now. Don't assume that your home insurance… are going to hold steady.” — Caitlin (28:43)

• Renters

  • Still subject to trickle-down costs: as landlords’ insurance/taxes rise, rents likely will.
  • Renters insurance is inexpensive, covers personal property, and is “not as susceptible to the fluctuations.” Remember: Neither renters nor homeowners insurance covers floods by default—separate flood insurance is required.
  • “You probably are underestimating how much all of your belongings are worth and you won't realize how much you actually had until it is gone.” — Caitlin (27:16)

Housing Market Vulnerabilities & Future Risks

• Potential Climate Risk “Housing Bubble”
  • In climate hotspots, $70,000 or more of unpriced risk could deflate values when insurance or repair costs rise.
  • “For every $100 increase in climate related premiums, property values dropped by an average of $1,000.” — Sean (30:30, citing Jupiter report)
  • If areas become uninsurable, buyers must pay cash and housing values could collapse—a risk for communities and homeowners alike. (31:11–32:41)

Silver Linings & Positive Developments

• Awareness and Change
  • Consumer awareness about climate risk and insurance cost is growing and driving market/industry shifts.
  • “When I first started… people didn't understand the connection… now I mention it and they go, oh, that's right.” — Caitlin (32:58)
  • Homebuilders and insurers now emphasize resilience and mitigation (discounts for upgrades; building code changes).
  • Government and legal action:
    • First-of-its-kind Senate report (Dec 2024) and class-action lawsuit against fossil fuel companies (Dec 2025) over home insurance costs.

Timestamps for Important Segments

| Timestamp | Segment | |-----------|--------------------------------------------------------------------------------------------------------------------------------------------| | 00:49 | Introduction to behavioral biases in finance | | 02:30 | Explanation and examples of loss aversion, herd mentality, and overconfidence bias | | 04:27 | Tips on loss aversion & tax loss harvesting | | 06:32 | Avoiding herd mentality in investments | | 08:09 | Overcoming overconfidence bias | | 09:12 | Hosts reflect on their personal finance challenge | | 17:43 | Listener question: Climate change and the decision to buy a house | | 18:47 | How climate-related weather events are changing; rise of hail storms | | 19:46 | Data: Home insurance up 24% nationwide, 95% of ZIP codes affected | | 21:14 | Growing trend: homeowners skipping insurance; risks involved | | 22:03 | FAIR plans and the risk of limited, expensive state-run insurance | | 24:05 | Home insurance impacts escrow payments and affordability | | 25:15 | Construction and homebuyer trends: resilience, energy efficiency | | 28:43 | Advice for homebuyers: expect rising costs, assess climate risk, make homes more resilient | | 30:30 | “Climate housing bubble”: modeling future risk and property values | | 32:58 | Positive signs: increased public awareness, emerging industry and legal changes influenced by climate and consumer concern |

Memorable Quotes

• “We're basically right out of the jungle throwing money at whatever looks shiny and nice to us.”
  — Sean (02:13)

• “To overcome overconfidence bias, humble yourself. And I mean that in the nicest way.”
  — Elizabeth (08:09)

• “Frictionless habits die hard. There's a reason why all of these tech companies are making it frictionless for us to spend our money—because it's super easy to use it and it makes you go back for more and more.”
  — Sean (14:30)

• “Extreme hail storms in particular are becoming more common and the costs associated with hail damage are becoming bigger along with the frequency.”
  — Caitlin (18:47)

• “One out of every seven… homeowners in the United States are going without home insurance.”
  — Caitlin (21:14)

• “If you start seeing homes losing value, like what does that mean for the financial well being of those homeowners and what does it mean for the property tax base of that community?”
  — Caitlin (31:11)

• “Consumer awareness is what will lead to changing behaviors, and changing behaviors is what leads things to start rippling throughout.”
  — Caitlin (32:58)

Final Takeaways

• Recognize your own psychological traps (loss aversion, herd mentality, overconfidence)—they lurk everywhere, not just in investing.
• Pause before spending or making big money decisions; challenge your motivations, seek outside opinions, add friction to stop impulse behavior.
• Climate change is already making home insurance more expensive and harder to get everywhere, not just in obvious high-risk areas.
• When considering home ownership, bake in future increases in insurance and taxes, and use climate risk tools.
• For renters: get renters insurance, check for flood coverage, and be aware that rising costs may eventually affect your rent.
• Progress is happening: Home building and insurance industries are adapting, legal and government efforts are underway, and consumer awareness is rising—sometimes the best protection starts with asking informed questions.