You are currently viewing What Is Underinsurance, And Why Should I Care?

My eyes have seen

What my hand did.

-Robert Lowell

Underinsurance means that your property is insured for less than its worth.

When you purchase a homeowners policy your home is insured up to a certain limit. That limit is found on the Declarations Page of a policy.

Underinsurance Example

example underinsurance policy

In this Declarations Page example, the home (“Dwelling,” Coverage A) is insured up to the limits of $421,600. If your home was completely destroyed by a covered loss, then you are generally entitled to the entire limits of $421,600. But what if the actual value of your home was $721,600? Then you’re faced with a $300,000 uncompensated loss. That’s why understanding underinsurance is crucial.

Almost 60% of homes are underinsured by an average of 20% according to Consumer Reports. Data compiled by United Policyholders is sobering:

  • 53% of homeowners were underinsured by an average of $103,000 during the 2015 Valley Fire;
  • 65% of homeowners were underinsured during the 2015 Butte Fire;
  • 46% of homeowners were underinsured during the 2013 Black Forest Fire;
  • 55% of homeowners were underinsured by a average of $94,000 during the 2012 Colorado Wildfire; and
  • 56% of homeowners were underinsured by an average of $110,000 during the 2011 Central Texas Wildfire.

Of course the problem of underinsurance is not realized until it’s too late. So what to do?

Make sure that your insurance company has paid you your entire limits. At best, your insurance company should pay you the limits found on your Declarations Page. After that, there’s not a lot you can do.

Underinsured Homeowners Claim

In certain cases, however, you may be able to bring a claim against parties responsible for the damage. For example, perhaps a contractor burned down your home during a remodel. Although your insurance company paid you your dwelling limits, you were underinsured and therefore have uncompensated losses. In that example, you could bring a claim against the contractor for negligence and hope to collect your uncompensated losses. The Made Whole Doctrine, however, then becomes an issue. In other words, if you think someone is responsible for the damage to your property and you have uncompensated losses, you should contact a Property Damage Attorney.

Overall, your best scenario is that your property is adequately insured. Your second best scenario is that your insurance company has paid out your limits, and you can collect uncompensated losses from a negligent third party.

Going forward make sure your property is adequately insured so you can avoid underinsurance.

Questions? Contact Me for a free consultation.

Evan Walker

Evan W. Walker is a La Jolla attorney who has practiced law since 2008. He has practiced law throughout California, Connecticut, and Louisiana.

Evan worked for and defended insurance companies during the first 7 years of his practice. Since 2015, he has represented people with personal injury and property damage claims and insurance disputes.

Evan’s practice is devoted to serious personal injury claims and catastrophic property damage claims. Areas of focus include security claims against bars and other businesses, government tort claims, fire and flood claims, and inverse condemnation. On behalf of clients, Evan has fought insurance firms, international companies, cities, bars, and casinos.

Evan regularly shares his expertise with other attorneys by teaching courses on insurance and inverse condemnation. He has taught several continuing legal education courses to Attorney Credits, a nationwide CLE company, and ProLawCLE, another nationwide CLE company. He also contributes to various podcasts and publications.


  • Member, State Bar of California
  • Member, San Diego Bar Association
  • Member, Consumer Attorneys of California
  • Member, Consumer Attorneys of San Diego
  • Member, La Jolla Bar Association
  • Member, La Jolla Village Merchants Association
  • Member, San Diego Chamber of Commerce