As a Los Angeles resident, I’ve heard that many homeowners found themselves underinsured following the devastating Palisades fire. Their policies won’t cover the full cost of replacing their damaged or destroyed homes. Rebuilding will mean a smaller home—or, dipping deep into their pockets to cover replacement costs.

This issue isn’t limited to California. Hurricanes, wildfires, severe thunderstorms and tornadoes have grown more frequent and destructive in recent years (flood and earthquake damage are covered by a separate policy). And according to a “Moneywatch” report, as many as 3 in 4 U.S. homeowners could be underinsured.¹ Non-profit United Policyholders also notes that out of a total $114 billion in losses due to natural disasters in 2023, insurers covered only $80 billion, “…meaning 30% of those losses were not insured, according to the Congressional Budget Office.”²

Given such shortfalls, Jennifer Gray Thompson, CEO of After the Fire USA, says more Americans should get to know their policies.³ Homeowners should also know current construction costs in their zip code, as costs are rising across the U.S.

• Review your coverage—especially if you’ve made changes to your home or belongings
• Consult an insurance professional. You may want to consult an investment professional with CFP® designation (such as myself) who can offer unbiased insurance planning advice.
• Consider increased limits—Thompson suggests getting the maximum that you can
• Consider extended costs or guaranteed replacement cost insurance if offered by your insurer.
• Inventory possessions and their replacement value. Check your policy’s “contents coverage.”
• Keep a record that your insurer, agent or broker has reviewed your limits and confirmed they are adequate.⁴

The LA fires make the risks to homeowners and insurers more apparent than ever, with insurers raising rates due to declining profits and in high risk areas, restricting new policies.⁵ According to AccuWeather, the toll of the fires is expected to top $250 billion, one of the most expensive disasters in California history.⁶ Mercifully, California’s insurance commissioner issued a moratorium in January reassuring homeowners living in the zones of the Palisades and Eaton fires that they “…cannot be dropped from their insurance policies.”⁷

1. https://www.cbsnews.com/news/home-insurance-full-coverage-natural-disaster/
2. https://uphelp.org/disaster-prep-how-to-know-if-youre-underinsured/
3. https://uphelp.org/disaster-prep-how-to-know-if-youre-underinsured/
4. https://uphelp.org/buying-tips/dos-and-donts-when-insuring-your-home/
5. https://www.nytimes.com/interactive/2024/12/18/climate/insurance-non-renewal-climate-crisis.html
6. https://www.accuweather.com/en/weather-news/accuweather-estimates-more-than-250-billion-in-damages-and-economic-loss-from-la-wildfires/
7. https://www.nytimes.com/2025/01/10/us/homeowners-insurance-fires-palisades-eaton.html?searchResultPosition=4