Penny Wise, Pound Foolish: How Inadequate Insurance Puts Borrowers and Lenders at Risk

“Saving a few bucks a month can translate to losses in the hundreds of thousands, or even millions, when a claim is denied or underpaid.”

I’ve had to sit across from people in my office and watch them well up in tears when they realize that their life savings, often entirely invested in real property, are gone because they didn’t have adequate coverage, or any coverage at all, for the specific loss they suffered.

Loan officers do a great job making sure borrowers have property insurance and that the limits look “adequate.” In 2025, that’s not enough. Wildfires, hurricanes, hail, tornadoes, and urban flooding are reshaping insurance markets and the fine print, such as exclusions, sub-limits, deductibles and valuation clauses, can leave borrowers unprotected and, by extension, leave your collateral exposed.

This year’s legislative changes, carrier withdrawals, and catastrophe-driven premium hikes mean every loan officer needs to understand what’s actually inside the insurance policy, not just that one exists.