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Are your homeowner clients unknowingly exposed to major coverage gaps? As premiums rise and natural disasters grow more severe, many are adjusting coverage without fully understanding the risks. Could scaling back mean scaling up financial vulnerability? Discover what agents need to know to help clients stay protected without compromising coverage.

As wildfires, tornadoes, and hurricanes become more frequent and severe, many homeowners across the country are struggling to secure affordable homeowners insurance. Over the past two years, average home insurance rates have risen by approximately 20% across the U.S.⁸ In high-risk regions, some insurers are withdrawing from the market altogether, leaving limited options and rising premiums in their wake.^1,3 Elevated reinsurance expenses and the growing impact of weather-related disasters in specific states drive these cost increases.² For homeowners, the challenge of staying insured in an increasingly volatile climate is becoming a pressing concern.

What do higher prices look like for the consumer? While a national average premium for a home with $350,000 in dwelling coverage might be around $1,570 annually, that same dwelling in Florida may have a premium closer to $3,200. However, if that same $350,000 home is located in a coastal area, like Miami, which is considered high-risk due to factors like hurricanes, storm surge, flooding, and sinkholes, premiums often rise to the $5,800 - $8,750 range. The 2025 market is softening, but this scenario illustrates how location plays a significant role in pricing.

Given rising premiums throughout several states, buyers may be, for the first time, considering diverse ways to reduce their renewal costs by cutting policy limits, dropping coverages, electing higher deductibles, or ultimately forgoing insurance altogether if they do not have mortgage requirements mandating coverage.^1,3

Because of this tension between availability and affordability, agents and policyholders may also overlook important home insurance exposures or exclusions. Understanding which perils are and are not covered is essential as homeowners weigh cost-cutting decisions. With standard policies often excluding certain high-impact risks, agents must help clients recognize the potential consequences of uncovered exposures. Below are several common but frequently misunderstood gaps inhomeowners coverage that can lead to costly surprises.

FLOOD

Following hurricane events, news outlets continue to report that many homeowners are surprised that their policies do not respond to losses caused by floods. Homeowner’s policies do not cover water intrusion from tidal surges or flooding rivers caused by torrential rains. Unfortunately, in 2024, many homeowners in the mountains of North Carolina and surrounding states, where major flooding had been uncommon, were left devastated as Hurricane Helene unleashed historic rainfall, swelling local rivers and creeks with deadly and devastating consequences. Homeowners must be continually reminded that floods are not a covered peril, and that separate coverage can be procured, even in areas that historically have had little flood activity. In many cases, new mortgages will not be approved without separate flood insurance where any such exposure exists.⁴

MOLD

Many insurance buyers are also unaware that mold is almost always an excluded peril within their policies. Fortunately, mold coverage can usually be endorsed onto a policy with sublimits ranging from $5,000 to $250,000. Policyholders should be advised that the mold coverage endorsed in their policies will not be triggered if a flood causes the mold, and that a separate flood insurance policy is still needed to cover any flood-related mold issues. Also, flood insurance generally does not cover any property stored in basements.⁵

EARTHQUAKES

For many homeowners, earthquake coverage is often considered an issue only for those living on the West Coast and in Alaska. Some may be unaware that earthquakes have occurred in all fifty states, and past intensity and frequency have varied widely by location.⁶ Since any earth movement (including landslides) is an excluded peril in homeowners’ policies, homeownersshould consider their seismic risk, obtain a geological survey if they have any landslide exposure, explore available insurance options, and review their level of preparedness. Agents can best serve their homeowner clients by providing quotes, evaluating the relative financial strength of earthquake insurers, and making purchasing recommendations accordingly. An insurer with relatively low premiums but insufficient financial strength may be unable to meet its insurance obligations if a significant seismic event affects many of its policyholders.

OPTIONAL COVERAGE EXTENSIONS

Many other lesser-known coverages available in the market may also be easily overlooked. The four most significant include Extended Replacement Cost on Dwellings, Water and Sewer Backup, Equipment Breakdown, and Ordinance or Law coverage.

EXTENDED REPLACEMENT COST

Some carriers previously offered guaranteed replacement cost coverage, eliminating the worry that a home might be underinsured, but this is now rarely included. Today, many carriers offer an Extended Replacement Cost Coverage endorsement. If the policy limit is inadequate to replace or repair a home, this endorsement can pay 25% to 50% above the stated policy limit. This endorsement should be considered, as it is increasingly complex to estimate the appropriate policy limit on a home accurately. The inflation of construction costs is driving up expenses in materials and labor, accelerated by a shortage of construction workers, supply chain interruptions, and the unknown potential impact of tariffs on building materials. In a recent insurance claims study, researchers analyzing claims data from a 2021 fire near Boulder, Colorado, found that roughly 75% of the affected homes were underinsured.⁷ As a precaution, agents and homeowners should consider this coverage endorsement, as the valuation of a home can prove to be imprecise and affected by evolving inflationary pressures.

WATER AND SEWER BACKUP, EQUIPMENT BREAKDOWN, + ORDINANCE & LAW

Water and Sewer Backup and Equipment Breakdown coverage are typically obtained in sublimits of $5,000 up to $250,000. The latter can pay for the repair or replacement of heating and air conditioning systems within the home, but is not to be confused with appliance repair policies marketed by home appliance warranty companies. Most homeowner policies include Ordinance or Law coverage, which is typically provided at 10% of the policy limit, for additional costs to repair or replace the property as required by local building codes. This coverage can be endorsed, allowing policyholders to increase this limit by 10% to 25%. Increasing this limit is often recommended, as some building codes require complete demolition of the property if up to 40% of the property is damaged.

PROPERTY-RELATED ENDORSEMENTS

Depending on their home or property’s unique characteristics, homeowners can consider many other property-related endorsements. These include Mold Coverage, Service Line / Utility Coverage, Fuel Oil Spillage, Sinkhole coverage, Scheduled Jewelry, Fine Arts, and coverage for other valuables, such as firearms or antiques. Homeowners may be required to provide their insurer with an appraisal of the scheduled items to obtain coverage. Insureds can also request a large loss deductible waiver, which waives the deductible if a loss exceeds an agreed amount, leaving the deductible to apply only to minor losses.

LIABILITY

The liability side of the homeowner’s policy can also be amended to afford coverage for unique exposures. Endorsements can extend coverage for personal injury allegations, liability to other owned locations, liability for miscellaneous businesses conducted in the home, such as dog grooming or beauty care services, and personal umbrella protection, which provides additional liability limits on top of the homeowner’s policy.

IDENTITY FRAUD

Identity fraud coverage is another add-on, generally offered at a sublimit, usually from $10,000 up to $50,000, and may include fraud alert services, credit monitoring, identity restoration assistance, reimbursement of expenses, and document replacement. It generally does not provide any liability protection, nor typically any reimbursement for the loss of money from cybercrime or phishing fraud. This extension has no standard coverage agreements, as each insurer provides its unique endorsement.

BOTTOM LINE

Policyholders who have experienced drastic changes in their renewal premiums may find the costs of considering additional insurance coverage beyond their reach and be inclined to self-insure any exposures not automatically covered in their homeowner’s policy. Savvy agents can nevertheless best serve their clients by developing a comprehensive checklist of all the homeowner’s potential property or liability exposures and discussing the financial risks associated with each of them if left uninsured. To better understand these exposures and their costs, a knowledgeable wholesale broker can assist retail agents in preparing for discussions with their clients and in placing homeowners’ policies or any related coverages. CRC’s experienced brokers work with various carriers and understand their pricing, financial strength, coverage details, and claims handling processes. Contact your CRC Specialty Producer today for guidance on the most effective solutions to fully insure your clients' homes.

CONTRIBUTORS

• Mary Roy is a Senior Underwriting Team Leader with CRC Specialty’s Middletown, Connecticut office.

END NOTES

1. Home Insurance ‘crisis’: First Florida, now California-is my state next?” Bankrate, September 16, 2024. https://www.bankrate.com/insurance/homeowners-insurance/insurance-crisis/
2. Property insurance in California and Florida: A problem of availability and affordability, Society of Actuaries, June 2024. https://www.soa.org/publications/gi-insights/2024/june/gii-2024-06-cappelletti-2/
3. A broken system keeps Californians’ homes underinsured April 2, 2025.https://uphelp.org/a-broken-system-is-keeping-california-homes-underinsured-millions-have-no-idea-theyre-at-risk/
4. SC Department of Insurance Flood from Natural Disaster: It is NOT typically covered by a home insurance policy! https://www.doi.sc.gov/858/Flood-Insurance#:~:text=Your%20Homeowner's%20Insurance%20Typically%20Doesn,agent%20and%20visit%20Floodsmart.gov
5. If Debby damages your basement, here’s what’s not covered by flood insurance, August 9, 2024. https://www.cnbc.com/2024/08/09/flood-insurance-basement-coverage.html
6. Facts + Statistics: Earthquakes and Tsunamis, Insurance Information Institute,https://www.iii.org/fact-statistic/facts-statistics-earthquakes-and-tsunamis
7. Study reveals widespread underinsurance among homeowners, exposing risk in the wake of devastating wildfires, University of ColoradoBoulder, January 9, 2025. https://www.colorado.edu/today/2025/01/09/study-reveals-widespread-underinsurance-among-homeowners-exposing-riskwake-devastating
8. Which state expects to see largest increase in home insurance premiums in 2025?, Insurance Business America, April 9, 2025. https://www.insurancebusinessmag.com/us/news/breaking-news/which-state-expects-to-see-largest-increase-in-home-insurancepremiums-in-2025-531551.aspx
9. Homeowners insurance has soared over 50% in these states, CNBC, May 9, 2025.https://www.cnbc.com/select/homeowners-insurance-has-skyrocketed-over-50percent-in-these-states/