American homeowners are increasingly opting out of home insurance coverage, motivated by rising premiums and perceptions of lower risk, the Wall Street Journal reported.
Recent data from Bankrate show that the national average for home insurance based on $250,000 in dwelling coverage has surged by 20% compared to the previous year, with the annual cost reaching $1,428.
At the same time, 12% of homeowners in the US do not have home insurance, according to a 2023 survey by the Insurance Information Institute (Triple-I) and Munich Re, with around half of this group reporting annual household incomes below $40,000.
Among the growing number of homeowners that have chosen to “go bare” is Larry Farinholt, a 73-year-old retiree from Los Angeles who told the Wall Street Journal that he has saved over $50,000 since deciding not to renew his policy after paying off his mortgage 25 years ago.
Farinholt said he doesn’t think the risk of wildfires or floods is high in his neighborhood, and that he has a dog to help secure his home from burglaries.
“It would probably be financially devastating if I lost my house, but I have enough money in savings to move into a condo in that event,” he said.
According to Amy Bach, executive director of insurance consumer advocacy group United Policyholders, homeowners like Farinholt are making the choice to forego insurance as they grapple with the affordability of current insurance rates.
Compounding the challenges associated with rising costs, homeowners have also been struggling with insurers choosing not to renew certain policies due to heightened risks associated with severe weather damage.
This is especially true for homeowners in places like California and Florida, where insurer pullbacks have been an on-going trend.
With fewer options available in the market, some homeowners in catastrophe-prone areas have chosen to be uninsured rather than turn to state-run policies that would have them pay higher premiums for reduced coverage.
But Los Angeles-based financial adviser Noah Damsky said going without home insurance is a “risky proposition” and warned that homeowners must “fully understand” the financial consequences of such an option.
Should a disaster such as a fire, flood, or another catastrophic event occur, homeowners without coverage might find themselves saddled with the financial burden of debris removal and reconstruction costs, the Wall Street Journal noted, in addition to dealing with the loss of the home and its contents.
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