"When disaster strikes, many Americans face a near flip-of-the-coin chance that their home insurer will pay a claim," said The Wall Street Journal's front page on Monday morning. It claimed that, among the five biggest providers, 44% of all claims went unpaid, up from 36% 10 years ago.
The news lands just as the nation is entering the annual disaster season, when the risks associated with hurricanes, wildfires, and flooding increase significantly. Many homeowners will be feeling uncomfortably vulnerable, and we urge them to check their policies for exclusions.
Deductibles Prevent Many Payouts
One of the biggest barriers to successful claims is high deductibles. A deductible is the sum the homeowner agrees to pay out of pocket before a claim kicks in. And these have risen sharply in recent years for two reasons.
First, budget-conscious consumers have been choosing higher deductibles to keep their monthly premium payments in check.
And secondly, insurers have been imposing higher deductibles on disaster coverage for risky homes. The insurance industry has struggled (and sometimes failed) to remain profitable as natural disasters have become more common in recent years.
"One way they have done this is to raise deductibles, or the amount the customer has to pay before the insurer kicks in," says The Journal. "Some companies applied higher deductibles to specific risks such as hurricane and hail, and changed certain deductibles from a dollar value to a percentage of the value of a home. They have also set tighter criteria for claims on expensive items like roof replacements."
Lowballing Claim Payouts
Home insurers have also grown increasingly likely to minimize payouts on claims resulting from natural disasters. The Journal spoke to a Florida couple whose $3.7 million house was severely damaged by Hurricane Milton.
An independent assessor put the damage at $527,000. But the insurer said most of the damage was not covered owing to the policy's exclusions, and the covered risks totaled less than the couple's $33,440 deductible. So, the couple's payout was zero, and they have begun legal proceedings against the insurer.
The Journal implied that many insurers have begun to interpret exclusions more strictly than they used to
Flooding Isn't Covered
Some homeowners are devastated when they learn that damage resulting from natural flooding is not covered. They can typically claim for a flood caused by a burst pipe or backed-up sewer, but not from overflowing rivers, flash floods, sea incursions, and the like.
"Flood damage is excluded under standard homeowners and renters insurance policies," says the Insurance Information Institute (iii). "However, flood coverage is available as a separate policy from the National Flood Insurance Program (NFIP), administered by the Federal Emergency Management Agency (FEMA), and from many private insurers."
The iii reported a 2023 survey that found that 22 percent of homeowners said they were at risk of flooding. While 78% said they had purchased coverage, that still left more than one in five without any protection, despite their being aware they were living in a known flood zone.
Standard homeowners' policies also exclude earthquakes, according to the iii. However, it's possible to buy a separate earthquake policy.
Rising Homeowners' Premiums Are Affecting Consumers
In May 2026, the Pew Research Center published the results of a March survey. It found 71% of homeowners had noticed rising policy costs over the previous few years, including 48% who said those costs had gone up a lot.
Better-off homeowners noticed the increase more, partly because they were more likely to have coverage. Only 2% of upper-income respondents said they had no insurance, while 17% of those on lower incomes had no policy.
Mortgage lenders require borrowers to have homeowners insurance. So, presumably, those without coverage own their homes outright, perhaps because they have finished paying off their mortgage, inherited the property, or originally paid cash for it.
Pew found (we quote:)
- About two-thirds (65%) say insurance companies wanting to make more money is a major reason [for higher premiums]. An additional 23% say this is a minor reason.
- 61% say repair and rebuilding costs are a major reason, while 25% call this a minor reason. Higher costs for labor and building materials make it more expensive to repair and rebuild homes after damage.
Our guess is that both of those are likely valid reasons that premiums are rising.
Things Set to Get Worse ... and Maybe a Bit Better
Although nearly all scientists who study climate change agree that mankind is causing the increase in global natural disasters, many disagree. But regardless of that argument, it is undeniable that the number of extreme weather events has been rising steeply in recent decades.
Between 1980 and 2026, climate and extreme weather events cost the United States $3.1 trillion (in 2026 prices) and 17,370 deaths, according to Climate Central. That's within a period of 46 years. But very nearly half the dollar costs ($1.5 trillion, again in 2026 prices) have been incurred since 2016 — within just a single decade. So, things are rapidly worsening.
This bodes ill for both insurers and the insured. One glimmer of hope: the Insurance Information Institute said last year that there were early signs of the homeowners insurance market stabilizing. It even hoped the sector would return to profitability in 2026.
