An alarming number of American homeowners are tempting fate by putting one of their biggest assets at risk, and it’s what they’re not doing that’s triggering worry among financial planners.
A new report from the Consumer Federation of America (CFA) found one in 13 U.S. homeowners are “going bare” by skipping home insurance. This short-term money saver creates long-term risks by leaving homes vulnerable to unexpected disasters. But why are so many opting out of coverage — and what can they do to protect their homes affordably?
For millions, skipping home insurance is driven by cost concerns, a misunderstanding of coverage, and, for some, the conscious choice to drop insurance because they’ve paid off their mortgage and no longer have a lender to require coverage.
“Concerns are growing that many American homeowners are forced by financial realities to forego homeowners insurance,” the CFA said in its report.
“But going bare puts consumers at risk of accruing significant financial debt to repair their homes, having to live with unsafe and inadequate housing conditions, or moving from homeowner to homeless after disaster strikes.”
To avoid the worst case scenario, it’s a good idea to find a balance between your budget and coverage needs without giving up insurance altogether.
Many uninsured homeowners cite rising insurance costs as a barrier, the report said. As premiums have steadily increased, especially in areas prone to natural disasters, the monthly expense can be prohibitive — causing people to forego it with hopes they’ll never need it.
Living outside designated flood zones or in areas with low crime rates can also lead some homeowners to assume they’re not at risk — logic that can lead to huge financial consequences since disasters don’t always hit within their predicted boundaries. The reality is that even in traditionally “safe” areas, wildfires, hurricanes, flooding and other emergencies can still hit hard.
Some homeowners may not think the coverage they would get would even be worth the cost or trouble of trying to find a policy in the first place.
“In recent years homeowners across the country have felt the pressure of escalating rates, diminishing coverage, and declining availability,” the report said.
And for those who’ve recently paid off their homes, it’s tempting to eliminate one more bill. But without insurance, they’re on the hook for repair costs or a full replacement in the event of a disaster.
Not having insurance means facing the financial impact of damage or loss alone. Here’s why it’s an especially risky choice:
Unpredictable costs: Natural disasters, like floods and fires, can trigger repair bills ranging from thousands to hundreds of thousands of dollars — or even the full price of your home. Without insurance, homeowners cover these expenses entirely out of pocket.
Limited federal help: While The Federal Emergency Management Agency can offer some relief after a disaster, the funds provided rarely cover the full cost of rebuilding. Homeowners without insurance could be left financially devastated.
Home value protection: Insurance not only provides peace of mind but it can help maintain the value of a home after unexpected events if you opt for full replacement cost coverage. Lacking coverage can make it harder to recoup losses or sell the property.
Rest assured, there are ways to get home insurance at a reasonable cost.
All insurers assess risk differently, so getting multiple quotes can lead to savings. Many also offer discounts for bundling home insurance with auto or life policies.
Many states have programs for homeowners who can’t find affordable coverage elsewhere. For instance, high-risk areas often have Fair Access to Insurance Requirements plans that provide basic coverage for those unable to get it through standard providers.
For those who already have coverage but want to cut costs, there are some simple ways to save.
Increasing your deductible is one of the quickest, but make sure you can afford to cover the deductible out-of-pocket in case of a claim. Many insurers offer discounts for installing security systems, storm shutters or fire-resistant roofing. These improvements protect your home and can trigger insurance discounts.
Maintaining a good credit history can give you a leg up on your premium too, as many insurers factor that in when calculating premiums. Improving your score could even save you hundreds every month.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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