Millions of homeowners report feeling confident about their insurance protection, yet industry data and survey results indicate that much of this confidence may be misplaced, with two out of three US households at risk of underinsurance during record disaster losses.
An Insurance.com survey found that many policyholders expect their current coverage to pay for major disaster-related damage, even though standard policies contain exclusions that affect reconstruction or total-loss claims. Survey responses included strong levels of perceived protection for hurricanes, floods, earthquakes and wildfires, though experts note that coverage for these events varies significantly.
The survey’s findings align with estimates from the American Property Casualty Insurance Association (APCIA), which reports that about two out of every three homes nationwide may be underinsured. Only 30% of insured homeowners have increased their coverage to match higher replacement costs, even after cumulative increases of more than 30% in building materials and labor during the past five years, according to the Insurance Information Institute.
The gap is occurring during a period of heightened weather activity. The National Oceanic and Atmospheric Administration recorded 27 billion-dollar climate and weather events in 2024, producing more than $182 billion in losses. Since 1980, the United States has seen 341 such events totaling $2.915 trillion in damage.
Flood coverage remains the largest area of misunderstanding. While 32.6% of surveyed homeowners stated they have flood insurance, industry data places the national participation rate at roughly 4%. Ninety per cent (90%) of natural disasters involve flooding, but homeowners’ insurance does not cover flood damage without a separate policy. In the five states that account for most federal flood claims - Florida, Louisiana, New Jersey, New York and Texas - 12.4% of surveyed homeowners said they dropped flood insurance because of cost concerns.
Disaster-prone states show mixed confidence in their coverage. In California, Arizona, Nevada and Texas, self-reported confidence in wildfire protection ranged from 40% to nearly 70%, while a portion of respondents in hurricane-prone areas were uncertain about whether their policy included a hurricane deductible. Earthquake coverage remains low, with fewer than half of confident respondents reporting that they hold an earthquake policy.
Industry representatives recommend routine policy reviews to ensure coverage aligns with current rebuilding costs. Additional options such as inflation guard, extended replacement cost and building-code coverage may help reduce the likelihood of underinsurance.
