Fire Rebuild Coverage Limits & Underinsurance in Pacific Palisades

After the January 2025 Palisades and Eaton fires, many homeowners in Pacific Palisades and Altadena discovered a second shock—their coverage limits weren't enough to match real rebuild costs.

On paper, they were "covered."
In reality, bids from builders came in hundreds of thousands — sometimes over a million — dollars higher than the number in the policy.

This article walks through how coverage limits work, why underinsurance is so common in our area, and what you can do if you're worried your policy doesn't match the cost to rebuild.

1. The Basics: Coverage Limits in a Homeowners Policy

Every policy is different, but most California homeowners policies include:

On top of that, some policies have:

• Extended Replacement Cost (e.g., 25%–50% above Coverage A in certain conditions)
• Ordinance or Law / Code Upgrade coverage
• Specific sublimits for items like debris removal, landscaping, or specialty property

The challenge after a major fire is that these limits were often set years before, based on old assumptions about construction costs—and not on what it actually costs to rebuild a custom or high-end home in Pacific Palisades in 2025.

2. Why Underinsurance Is So Common in Pacific Palisades

Several forces came together before and after the 2025 fires:

Rapidly rising construction costs

California has seen sharp increases in labor and material costs, especially for skilled trades and fire-resistant construction.

High-end, custom homes

Many homes in Pacific Palisades have:

• Custom architecture
• Complex hillside foundations and retaining structures
• High-end finishes and built-ins

These are often more expensive to rebuild than the "standard" home used in generic pricing models.

Estimating systems built around averages

Many carriers rely on standardized estimating platforms and internal tools that use regional or national average pricing. Those systems don't always track surge pricing after a catastrophe—when contractors, materials, and timelines are all under severe strain.

Policy limits that weren't updated regularly

If your Coverage A limit was set years ago and only increased by a generic percentage each year, it may lag far behind what it actually costs to rebuild now.

Put simply: in a place like Pacific Palisades, it's very easy for the policy number and the real rebuild number to drift apart.

3. Signs You May Be Underinsured After the 2025 Fires

Here are some warning flags:

• Contractor bids are significantly higher than the carrier's estimate and your Coverage A limit.
• Your policy has little or no code upgrade coverage, even though your rebuild must meet current fire, seismic, and energy codes.
• The estimate you received doesn't seem to fully reflect:
  • Hillside work, complex foundations, and retaining walls
  • High-end cabinetry, finishes, and fixtures
  • Outdoor living areas, pools, decks, and hardscape
• You feel pressure to "value engineer" the rebuild—shrinking the footprint or cutting finishes—just to fit inside the policy limit.

None of these automatically prove underinsurance, but together they're a reason to take a closer look.

4. Key Coverage Areas to Review Carefully

If you're a Pacific Palisades fire survivor, it's worth sitting down with your policy and estimate (ideally with a trusted advisor) to review:

a) Dwelling Limit (Coverage A)

Compare your Coverage A limit to:

• Your carrier's rebuild estimate
• Real bids from reputable local builders

If serious builders tell you they can't rebuild your home at or near your dwelling limit, that's a critical data point.

b) Extended Replacement Cost

Some policies offer an additional percentage over Coverage A, but:

• It may only apply under specific conditions
• It may require you to meet certain deadlines or documentation requirements
• It may still not close the gap on a high-end, custom rebuild

c) Ordinance or Law / Code Upgrades

After a disaster, building codes and enforcement can change or tighten. You may be required to:

• Install additional fire-resistant materials
• Upgrade structural elements
• Meet current energy and safety standards

If your policy's code-upgrade coverage is low, those costs may fall on you.

d) Other Structures & Landscaping

Retaining walls, driveways, guest houses, and mature landscaping can represent significant costs in hillside communities. Make sure the limits and sublimits for Coverage B and any landscape provisions realistically reflect what you lost.

5. How an Independent Rebuild Valuation Helps Clarify the Picture

When you're trying to understand whether your coverage limits are adequate, an independent, builder-verified valuation can help bridge the gap between the policy and estimate on paper, and what it actually costs to rebuild your specific home in today's market.

A service like ClaimArchitect focuses on:

• Reading your full policy and carrier estimate
• Reconstructing your home in professional CAD, based on plans and photos
• Running detailed takeoffs (square footage, quantities, finishes)
• Applying local construction pricing specific to the 2025 post-fire environment
• Having a licensed general contractor review and sign off on the numbers

You end up with a 55–75 page rebuild valuation that:

• Puts a defensible price on what it takes to rebuild your home
• Can be shared with your adjuster, public adjuster, or attorney
• Helps you see clearly whether your coverage is likely to stretch far enough

ClaimArchitect doesn't tell you whether to litigate, hire a public adjuster, or accept an offer. It gives you the pricing clarity those decisions depend on. Learn more about how the process works.

6. What to Do If You Discover You're Underinsured

If you strongly suspect underinsurance:

Document everything

Keep copies of all estimates, bids, and communications.

Talk to professionals you trust

That might include:

• A contractor or builder
• A public adjuster
• An attorney who handles fire insurance claims
• Consumer resources like the California Department of Insurance and nonprofit groups such as United Policyholders

Consider a deeper valuation

An independent, builder-verified valuation can strengthen your position when you're discussing options with your advisors.

Be realistic about timelines and scope

Underinsurance doesn't automatically mean you can't rebuild—but it may affect design choices, timelines, and financing.

7. How ClaimArchitect Fits Into Your Pacific Palisades Recovery Plan

If your home was affected by the Palisades Fire and you're looking at numbers that don't add up, ClaimArchitect can help you:

• Understand the true cost of rebuilding your home today
• See clearly whether your coverage limits are likely to fall short
• Bring an independent, builder-verified report into conversations with your adjuster, public adjuster, or attorney

You stay in charge of your claim strategy. ClaimArchitect's role is to measure and price the rebuild, so you're not guessing.