A year after devastating wildfires tore through the Los Angeles, California, area, many survivors are still dealing with insurance policies that won’t cover the full cost of rebuilding their homes. It’s a problem that has been quietly growing since the 1990s.
What’s happening?
For decades, most American home insurance policies have been moving away from guaranteed replacement coverage, which once promised to rebuild homes at any cost. Instead, insurers now typically cap how much they’ll pay — and it often falls far short of the actual costs of rebuilding. This situation can be exacerbated in the wake of major disasters in which entire neighborhoods are destroyed.
Advocacy group United Policyholders has surveyed wildfire survivors since 2007, finding that, on average, two-thirds are underinsured, typically by $200,000 or more, according to Bloomberg. The outlet reported that the Insurance Information Institute also estimated that two-thirds of American homeowners are underinsured for wildfires, sometimes by as much as 60%.
Meanwhile, the L.A. fires alone reportedly destroyed over 15,000 structures.
Why is this concerning?
The underinsurance crisis stems from the same forces driving more extreme weather…