Many U.S. homeowners may lack full insurance coverage, study says

Many homeowners in the United States may be underinsured for common disasters such as floods, wildfires, and hurricanes. Insurance industry experts say gaps in policy coverage and limits can leave homeowners with high out-of-pocket costs after damage, even when they believe their coverage is adequate. This explainer summarizes what happened, who is affected, and practical next steps for homeowners to review and strengthen their insurance protections.

What changed: coverage gaps highlighted by experts

Industry professionals cited by a CNBC report describe several gaps in typical homeowners policies. Key issues include insufficient flood coverage, limits on rebuilding costs, and inadequate coverage for high-cost items inside the home. These gaps mean that, even if a policy seems comprehensive, it may not fully cover damage from events like floods, wildfires, or severe storms. Experts emphasize that rising rebuilding costs and higher premiums have increased the risk of underinsurance for many households.

Key facts you should know

• Flood damage is not always covered by standard homeowners insurance; separate flood policies or riders may be required.
• Rebuilding costs can exceed policy limits if those limits were set years earlier or don’t account for current construction prices.
• Some items inside the home, such as valuables or specialized equipment, may have limited coverage unless riders are added.
• Premiums have risen in recent years, influencing how much protection homeowners can afford while maintaining sufficient coverage.

Who is affected

The issue affects a broad range of homeowners who assume their policy fully protects them. The report notes a mismatch between perceived protection and actual coverage, with many people potentially exposed to substantial repair or replacement costs after disasters. Those in disaster-prone areas, or who own high-value homes or contents, may be especially at risk if their policies aren’t reviewed and updated.

Practical next steps for homeowners

1. Review your current homeowners policy, focusing on limits for dwelling coverage, personal property, and additional living expenses.
2. Ask about and consider flood and high-value-item riders to close gaps in protection.
3. Check whether rebuilding costs reflect current prices and local construction costs; update if needed.
4. Document and inventory belongings, including photos and receipts, to support claims after damage.
5. Consult your insurer or a licensed insurance agent to understand optional coverages and ensure you have adequate protection for your home’s location and value.

Limitations and questions to ask

Policy language varies by insurer and state. Key questions to ask include whether flood coverage is included or requires a separate policy, how replacement cost versus actual cash value is calculated, and whether certain valuables are covered or require riders. Clarify what events trigger coverage, any depreciation rules, and how claims are handled if rebuilding costs rise after a disaster.

Information and responsibility notice: This article is general information based on the cited material available when published. It is not legal, tax, immigration, medical, financial, banking, or investment advice; it does not create a professional-client relationship; and it is not a guarantee of outcome, availability, accuracy, or eligibility. Rules, schedules, prices, and third-party information can change. Confirm material decisions with the relevant authority and an appropriately qualified adviser before acting.