California Western School of Law professor Kenneth Klein reviewed 74,000 fire-related insurance claims filed in the state from 2018 through 2023. More than 70% of insured homeowners in the sample were underinsured by an average of roughly 20%.
Klein called the situation a “barely hidden nationwide crisis of underinsurance,” although his analysis covered California claims. A Treasury Department report found replacement costs for property-and-casualty insurance losses rose an average 45% from 2020 to 2023; older dwelling limits may not automatically adjust to keep pace with rebuilding costs.
Standard homeowners policies do not cover flooding, which requires a separate policy. Fewer than 4% of U.S. households had National Flood Insurance Program coverage, based on a 2025 FEMA post cited by CNBC; NFIP coverage generally starts 30 days after purchase. The article recommends checking whether dwelling limits reflect current rebuilding costs and whether claims pay replacement cost or actual cash value, which deducts depreciation.
