As Home Insurance Bills Go Up, Owners’ Coverage Is Going Down

Robert Shiver’s bill for his homeowner insurance jumped from $3,800 in 2022 to $8,000 in July. “I remember opening the bill and, honestly, laughing, like, ‘This is not feasible,’” he said.

Mr. Shiver, 40, who lives about 20 miles east of Tampa, Fla., did not pay the bill. Instead, he worked with his insurance agent to shave off parts of his coverage, lowering the estimate for how much the insurer would have to pay to potentially rebuild his house from around $710,000 to about $560,000.

Shrinking the coverage lowered his bill to just under $5,000, a huge relief, he said, since he would again be able to make his monthly mortgage and insurance payment.

In the insurance business, Mr. Shiver might now be considered “underinsured,” meaning that his policy may not be sufficient to cover a rebuild after catastrophic losses. Underinsurance is not a new problem, but it has become far more widespread and severe over the past three years, as rising inflation and climate change have created a highly volatile and unreliable insurance market and raised costs for homeowners — sometimes in unexpected ways.

Insurers’ losses from natural disasters topped $100 billion for the fourth straight year in 2023, and they are passing those costs on to property owners. High inflation has also forced insurers to raise rates to cover claims.

Some homeowners are nickel-and-diming their own coverage by forgoing protection against hurricanes or windstorms; finding ways to lower the replacement values of their properties, as Mr. Shiver did; or raising their deductibles. Others are discovering that their policies won’t fully cover the cost of rebuilding because of steep increases in the cost of materials, once disaster has already struck.