Homeowners insurance advice: Lessons learned from others

The most important advice is to insure your home for replacement cost accuracy, not market value or last year’s premium. We routinely see well-maintained homes underinsured because costs for labor, materials, and code upgrades rise faster than policies are reviewed. From our experience, the biggest claim problems happen when coverage limits lag behind real rebuild costs, especially after regional disasters that drive up demand.

What we’ve learned is that small policy details matter more than most homeowners realize. Deductible structures, roof settlement terms, ordinance or law coverage, and water backup limits often determine whether a claim feels manageable or financially painful. A yearly coverage review that recalculates rebuild cost and confirms key endorsements prevents unpleasant surprises far more effectively than chasing the lowest premium.

One piece of advice I give homeowners about insurance is to read the policy and revisit it every year. Before, I assumed coverage automatically kept pace with rising home values in San Diego. That assumption cost me time and stress when a claim exposed gaps I did not expect. The house was insured, yet the rebuild cost reflected numbers from years earlier, not current labor and material prices.

Since then, I treat homeowners’ insurance as part of owning real estate. I review coverage like I would rent rolls or maintenance reserves. I closely examine replacement cost, loss of use, liability limits, and exclusions that affect homes in coastal markets. I also make sure the policy matches how the property is actually used, whether it is owner-occupied or held as an investment.

What I learned is simple. Insurance only works if it reflects reality. Markets move, houses change, and risks evolve. When coverage stays static, surprises follow. Spending an hour a year reviewing a policy has saved me far more than it costs. For anyone serious about protecting real estate wealth, insurance deserves the same attention as buying the house itself.

Since I spend my time buying houses that are falling apart, I know exactly what it looks like when a family has to leave their home after a disaster.

People often overlook “Loss of Use” coverage. Even if your house is destroyed by fire or flood, you still need a place to stay and food. I know of a family whose walls and floors were completely destroyed by a severe leak. They were forced to leave for three months while the mold was removed and everything dried out. Because their Additional Living Expenses coverage was inadequate, they ended up living in a small motel and spending a fortune on takeout. And they ended up paying for two houses at once.

So check the “ALE” or “Loss of Use” section of your policy today. Ensure that it will cover your costs for a minimum of one year. When your home is in a construction zone, it is the only thing that keeps your life normal, even though it is one of the least expensive aspects of a policy to raise.

One piece of advice I always share about homeowners insurance is this: don’t set it and forget it. Just like your real estate needs change over time, your coverage should, too. I’ve seen a lot of homeowners assume they’re fully protected simply because they have a policy in place, but the details matter more than most people realize.

Through years of working with buyers and sellers, I’ve learned that many folks are underinsured without knowing it. Renovations, rising construction costs, and even changes in neighborhood values can affect how much it would actually cost to rebuild a house. If your coverage hasn’t been reviewed in a few years, there’s a good chance it doesn’t reflect today’s reality.

Insurance should protect more than just the structure. Personal property, liability, and temporary living expenses if something goes wrong are all part of the picture. When people are focused on closing on a house, insurance often becomes just another box to check, but it deserves real attention.

My experience in real estate has taught me that smart homeowners treat insurance as part of long-term planning, not just a requirement to get the keys. A quick annual review can save a lot of stress down the road and make sure your house is truly protected when it matters most.

I don’t think enough people look at the exclusions carefully because they’re more focused on everything the insurance does cover. And once they tick off the main boxes, they tend to glaze over everything else. But the problem is that the exclusions tell you more about the policy than the coverage does.

Things like certain types of water damage, backups, gradual leaks, mold, or code upgrades often aren’t covered unless they’re specifically added. So you won’t even realize it until you file a claim and learn that the damage that you thought was “obvious” coverage actually falls outside the policy.

This is something I’m very careful about when checking policies because I’ve seen it go horribly wrong. You have to focus on exclusions because they tell you how safe you actually are. If you don’t slow down and look at them, then you’re making decisions based on comfort instead of facts.

I am a real estate attorney and CPA. I also teach real estate law at the university level.

Homeowners must scrutinize the actual cash value versus replacement cost distinction. They are not the same! Insurers frequently issue policies that cover losses on an actual cash value basis rather than replacement cost. This distinction can destroy a homeowner’s post-loss recovery. Most policyholder believe all policies are boilerplate (they are not) and will pay to rebuild their home in full (they usually do not).

For example, a 10-year-old roof damaged in a storm may only yield a depreciated payout of $6,000 despite a $22,000 replacement cost. If the homeowner has a mortgage, the shortfall becomes their personal financial obligation. We have seen Florida policyholders abandon homes after learning their payout barely covered demolition (forget rebuilding).

The insurance company’s adjuster is not your advocate and may actively undermine your claim. Do not rely on the company’s adjuster. Hire your own real estate attorney (not one that works for the company) EARLY in the process to represent YOUR interests.

After a loss, homeowners mistakenly trust that the insurer’s adjuster is neutral. In reality, the adjuster’s job is to minimize the payout using depreciation schedules, ambiguous policy exclusions, and manipulated scopes of loss.

We have seen reports mischaracterize wind damage as “wear and tear” to deny roof claims. In Texas and Florida, post-hurricane claims often require legal intervention when insurers delay payments or misapply “concurrent causation” clauses to avoid windstorm liability.

Finally, in practical terms, homeowners must adopt an approach which is both offensive and defensive: Insist on replacement cost coverage in writing, including for the roof and contents. Require an endorsement for ordinance or law coverage if your municipality requires upgraded materials.

Photograph each room and store digital copies offsite. Review your insurer’s litigation history in your state… some carriers have systemic denial patterns. Consider retaining an attorney in advance if your property is coastal or valued at or above seven figures.

Homeowners insurance is one of those things that every homeowner needs, but it’s easy to overlook until you need it. From my experience in real estate, I’ve learned that reading the fine print matters just as much as picking the right coverage. Every house is different, and the right policy depends on the type of property, its age, and the neighborhood risks.

I always advise clients to review their policies annually. Houses change over time, maybe a kitchen gets remodeled, or a new roof is installed, and those improvements should be reflected in your coverage. It’s also important to check what’s included and what isn’t. Some policies cover natural disasters differently depending on your location.

Another thing I emphasize is working with an agent who understands the nuances of homeowners’ insurance. There’s a lot to consider, from liability protection to replacement costs, and a good agent can explain these in plain language. In real estate, I’ve seen how a well-prepared insurance plan can prevent a minor incident from becoming a major setback.

Homeowners’ insurance is part of protecting your investment in your home. It’s peace of mind knowing that your family and your property are covered. For anyone buying a house, I recommend treating insurance as a priority early on rather than waiting until an emergency arises.