More Americans Taking the Risk of Dropping Home Insurance
Skyrocketing home insurance premiums and policy non-renewals are prompting a growing number of Americans to forgo their coverage, according to a recent report by Spotlight on America. While this decision can save money in the short term, it leaves homeowners vulnerable to significant financial losses in the event of a disaster.
! Homeowner Larry Bendik canceled his home insurance when the premium kept going up. (SOA)
Larry Bendik, a Florida homeowner, made the difficult decision to cancel his home insurance policy a couple of years ago after his premium increased by an alarming $1200 in a single year. “All of a sudden, things have gotten out of control,” Bendik stated, referring to the dramatic increase in premiums that is affecting homeowners across the nation. He and his wife, Mona, are retirees who have lived in their Tampa area home for nearly 30 years, without a mortgage. This situation allowed them to take this risk.
For those who are still paying off their mortgage, cancelling coverage isn’t an option.
Bendik considers his decision a calculated risk since his home is inland and has a high deductible.
“Even if something happened, I would still get stuck with a big bill anyway,” he said. “It didn’t make sense to pay that premium and get very little in return.”
The Broken Home Insurance Market
The home insurance market is under considerable strain, with a recent survey from the Insurance Information Institute indicating that 12% of homeowners now lack home insurance, more than double the 5% reported in 2019. Michael DeLong, an analyst with the Consumer Federation of America (CFA), described the situation as “a crisis.”
“The homeowners insurance market unfortunately is broken,” DeLong said. The increasing premiums and policy cancellations are leading more people to drop their coverage. DeLong cautioned, “It’s kind of understandable that some people would look at this and be like, I need to drop my insurance. I just can’t afford it. But it’s still a very bad idea. You’re putting yourself at extreme risk.”
Impacting Those Least Able to Afford it
A 2024 CFA report revealed that homeowners earning less than $50,000 annually are twice as likely to lack home insurance compared to the general homeowner population. The report also found that certain demographics are disproportionately affected, with 22% of Native American homeowners, 14% of Hispanic homeowners, and 11% of Black homeowners lacking coverage.
“The people who often needed protection the most, because they were least able to recover from disasters, they often were the people who didn’t have it,” DeLong said.
Risks of Wildfires
The impact of lacking insurance is being felt by many residents in the aftermath of the California wildfires. Some major insurance carriers pulled out of the area a couple of years ago, citing the wildfire risk. A recent Lending Tree study found that nearly one in ten Los Angeles homes had no insurance, leaving many residents seeking federal and state aid to rebuild.
Strategies for Reducing Premiums
While homeowners face challenges in affording home insurance, there are ways to save on premiums:
- Bundle your home insurance with your auto policy: Many insurers offer discounts for those who bundle multiple policies.
- Risk mitigation: Take steps to make your home more resistant to damage, such as getting a new roof or clearing brush around your home.
- Inquire about discounts: Some companies offer discounts for seniors, veterans, and new construction.
It always pays to speak with your insurance agent to explore potential savings.
