Robert Shiver’s home insurance bill increased from $3,800 in 2022 to $8,000 in July. “I remember opening the bill and honestly laughing and saying, ‘This isn’t feasible,’” he said.

Shiver, 40, who lives about 20 miles east of Tampa, Florida, didn’t pay the bill. Instead, she worked with her insurance agent to reduce portions of her coverage, reducing the estimate of how much she would have to pay the insurer to potentially rebuild her home from about $710,000 to about $560,000.

Reducing coverage reduced her bill to just under $5,000, a big relief, she said, since she would once again be able to make her monthly mortgage and insurance payment.

In the insurance business, Shiver could now be considered “underinsured,” meaning his policy might not be enough to cover a rebuild after catastrophic losses. Underinsurance is not a new problem, but it has become much more widespread and serious 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 due to natural disasters exceeded 100 billion dollars for the fourth consecutive year in 2023, and they are passing those costs on to owners. High inflation has also forced insurers to increase rates to cover claims.

Some homeowners are reducing their own coverage by forgoing hurricane or windstorm protection; find ways to reduce the replacement values ​​of your properties, as Shiver did; or increase your deductibles. Others are finding that their policies will not fully cover the cost of reconstruction due to sharp increases in the cost of materials once the disaster has already occurred.

Colorado Insurance Commissioner Michael Conway discovered the extent of the underinsurance problem after a wildfire near Boulder destroyed nearly 1,000 homes in 2021. After receiving calls from homeowners distraught that their policies wouldn’t fully cover the cost of reconstruction, the state Division of Insurance investigated and found that only 8 percent of policies in fire-affected areas were committed to covering reconstruction costs no matter how high. It also found that between one-third and two-thirds of all fire-affected homes were not sufficiently insured to cover rebuilding costs within a typical range.

To try to fix the problem, Conway and his team called meetings late last year with insurance companies, builders and other groups to brainstorm ideas to make things easier for homeowners, but so far no plan has emerged.

“We are very concerned about what those homeowners are experiencing with affordability issues, and we absolutely sympathize with the pressure they feel to find a way to pay for their insurance coverage,” Mr. Conway said.

Julie Coffey didn’t realize she was underinsured until she ran out of money while trying to rebuild her home near San Francisco after it burned to the ground in August 2020 in one of several large wildfires that devastated parts of California that summer.

Months passed before Ms. Coffey even knew what she would get from her insurer. When she began rebuilding her house in 2021, inflation was accelerating and building materials were in short supply. Her new house is missing key features she couldn’t afford, like a water softener and fencing.

“Within a month of living here, my sink is showing signs of rust,” Ms. Coffey said. “It’s crazy all the things you need to do to try to get closer to where you were without worrying or thinking.”

Mark Friedlander, a spokesman for the Insurance Information Institute, a trade group, said home insurance premiums had cumulatively increased by 32 percent between 2019 and 2023, while reconstruction and replacement costs had increased by 55 percent. The group’s analysts estimated that in 2023, home insurers would experience their largest underwriting loss (the difference between premiums collected and claims paid) since 2011. Behind the loss were huge storms that caused more than $50 billion in damages that insurers had to pay. for.

A survey last year by the institute and researchers at Munich Re, a reinsurer, found that 88 percent of U.S. homeowners had homeowners insurance, up from 95 percent in 2019. Only 4 percent had flood insurance, even though 90 percent of the country’s natural disasters involve flooding.

Once insurers raise premiums, many homeowners find that their lenders are willing to explore ways to make their payments more affordable. Banks that collect mortgage payments must ensure borrowers’ coverage meets requirements set by the government-backed housing agencies Fannie Mae and Freddie Mac, but are open to homeowners adjusting it within those requirements, he said. Pete Mills, chief economist at the Mortgage Bankers Association. , the mortgage industry trade group.

Amy Bach, executive director of United Policyholders, a nonprofit advocacy group that helps insurance consumers navigate complicated claims processes, said she finds herself recommending a multitude of strategies today to keep policies affordable.

“For most consumers, what they face now is: What is the worst option for me, given the price?” she said. She advises reducing coverage on the contents of a home or cutting coverage on outbuildings such as garages, sheds, pools or retaining walls.

“We had been saying, ‘Raise your deductible,’ but now what does that mean?” said Mrs. Bach. “My parents’ house on Long Island has a wind deductible of $33,000,” meaning they would have to pay that amount out of pocket (a large portion of the cost of a new roof) before getting help from their insurer.

Not everyone thinks allowing borrowers to reduce parts of their coverage is a good thing. Brian Marino, an insurance agent in Fort Lauderdale, Florida, said he was concerned that if homeowners had just enough coverage to satisfy their lenders, they would be able to recover what they needed after a disaster while borrowers couldn’t pay. a complete reconstruction.

“The bank is satisfied,” Marino said, “but they are out on the street.”

Friedlander, a spokesman for the trade group, said bundling home and auto policies and making “deductible adjustments” were common ways to reduce insurance costs, adding that the institute recommended working with an agent “to lower the cost of your policy.” without reducing levels”. of coverage.”

Homeowners aren’t the only ones cutting their coverage under pressure. The Peachtree Group, an Atlanta-based real estate investment company that owns hotels, rental homes, office space and other properties across the country, expects deductibles on some of its properties to increase this year in response to the increase of insurance costs, Charles Talbert said. the company spokesperson. That would force him to pay more reconstruction costs.

Sue Savio, an insurance agent in Honolulu, said underinsurance had recently become widespread on Oahu. “We have a lot of condos whose premiums would have doubled or tripled,” Savio said. But instead of paying those higher premiums, homeowners got rid of hurricane damage coverage, since those storms don’t frequently hit Hawaii.

“Our last hurricane was 32 years ago,” Savio said.

Those who own their homes or other properties have much more leeway in deciding whether or not to insure their properties. Some wealthy homeowners are willing to take the risk of being underinsured because they can afford to repair their properties themselves.

“I’ve talked to people who own their home and are choosing to avoid wind damage. They’re keeping the floods flowing,” said Brian Gray, a managing director at UBS whose wealth management group serves some of Tampa’s wealthiest residents.

One of Mr. Gray’s clients accepted a $1 million deductible.