Insurance is a business designed to make money. It operates on the principal that if many purchase coverage, the insurer does not have to charge extreme rates for the coverage, because the risk is spread broadly across a wide spectrum of customers, and it is statistically unlikely that all customers of a given insurance company will make claims simultaneously.
In addition to that spreading of the risk, insurance companies spend a great deal of time and money assessing how that risk affects their customers and this allows them to limit their risks with more precision.
They know that the risk of a tsunami in North Dakota is so infinitesimally small that they can rate it as zero. Cities on the West Coast of the U.S., like Seattle or San Francisco, however face a much greater risk, and so a homeowner's policy in Seattle is likely to be somewhat higher priced than one in Williston, North Dakota.
And this is one reason why Louisiana tops the list as having the most expensive homeowners insurance in the nation. Just one word, Katrina, explains much as to why Louisiana is so expensive.
It is not just the potential for hurricanes that drives that cost, but the fact that the largest concentration of population, and therefore homes, is located in New Orleans, much of which is located below sea level and is very vulnerable to hurricane-induced flooding.
Other factors can affect the cost of insurance, such as special coverage required by law or congested urban population centers that contain congested roads, which lead to many accidents and concentrations of vehicles, which makes auto theft more lucrative.
Elements such as the prevalence of insurance fraud can also factor into the cost of insurance in a specific location, driving up rates in some areas.
Nerdwallet.com, "Where do People Pay the Most and Least for Homeowners, Health, Auto and Life Insurance?" Jeffrey Chu, June 22, 2015