Most US Homes at Risk of Underinsurance Despite High Policyholder Confidence

A recent Insurance.com survey exposes a critical gap between homeowner perception and reality, revealing that two-thirds of U.S. households may be underinsured—just as the nation faces record-breaking climate disaster losses. While homeowners express strong confidence in their insurance coverage for events like floods, hurricanes, wildfires and earthquakes, industry data and experts highlight widespread misunderstanding and gaps in standard policies.

Claims adjusters should take particular note of the high rate of false confidence in flood coverage. Although nearly one-third of homeowners believe they are covered, national participation in flood insurance programs is closer to 4%. This discrepancy increases complexity during claims processing, especially in disaster-prone regions such as Florida, Louisiana, New Jersey, New York and Texas, where many policyholders are dropping coverage due to cost.

With building material and labor costs up more than 30% over five years, replacement costs have outpaced many existing policies. Adjusters need to be aware of the growing underinsurance issue when evaluating claims for total loss or major structural damage. The report emphasizes the need for proactive communication between insurers and policyholders regarding inflation guard, extended replacement cost, and code upgrade endorsements.

This data is particularly relevant in light of the 27 billion-dollar weather events recorded in 2024 alone. Adjusters working in wildfire-prone states like California and Texas, or earthquake zones such as Nevada, should be prepared for increased claim scrutiny and disputes related to inadequate coverage.