Why Americans are declining to buy homeowners insurance

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By Dan Sears

More Americans are declining to buy home insurance due to increasingly expensive premiums — leaving them at considerable risk of losing their home and personal belongings in case of a disaster.

The national average for home insurance based on an annual policy that offers dwelling coverage of up to $250,000 soared 20% this year to $1,428, according to Bankrate.

The higher premiums — which have been blamed on factors ranging from inflation spiking the cost of materials and labor to climate change — are at the root of why some 12% of US homeowners decline to buy insurance, according to the Wall Street Journal.

Of those who don’t buy policies, around half have annual household incomes of less than $40,000 per year, according to data cited by the Journal.

A standard homeowners insurance policy usually covers damage caused by fire, smoke, theft, vandalism, wind, hail and lightning. Flood insurance is typically not included in a standard policy.

Some homeowners decide to “go bare” because their insurance provider declined to renew their policy due to increased risk of inclement weather.

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An overturned tree sits in front of a tornado damaged home in Mayfield, Ky., on Dec. 11, 2021, after a tornado ripped through the area.
An overturned tree sits in front of a tornado-damaged home in Mayfield, Ky., on Dec. 11, 2021, after a tornado ripped through the area.
AP

Those who are unable to find an insurer that would agree to cover their property could turn to a FAIR Plan.

FAIR, or Fair Access to Insurance Requirements, is a state-run program jointly subsidized by taxpayers as well as private insurance companies.

The plan lets several companies cover a property under one policy — thereby spreading out the risk.

If a homeowner with a FAIR plan needs to file a claim, every insurance company participating would pick up a portion of the loss.


Extreme weather events in Florida and California have prompted insurers to scale back business or leave those areas altogether. The image above shows the aftermath of Hurricane Ian in Fort Myers Beach, Fla. on Sept. 30.
Extreme weather in Florida and California has prompted insurers to scale back business or leave those areas altogether. The image above shows the aftermath of Hurricane Ian in Fort Myers Beach, Fla., on Sept. 30, 2022.
AP

Major insurance providers have already left Florida, a state in the path of hurricanes.

State Farm and Allstate, two of the country’s largest insurers, recently announced that they would no longer write new homeowners policies in California due to the increased risk of home damage caused by the spread of wildfires.

Farmers, the insurer that has scaled back its business in Florida and California, announced Monday that it was laying off 11% of its workforce — 2,400 employees.

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Between 2019 an 2022, the cost borne by insurers of rebuilding and replacing damaged homes has surged by 55% while the cost of reinsurance — a type of insurance used by insurers to minimize risk — has risen by between 30% and 40%, Matthew Carletti, an industry analyst for JMP Securities, told CNN.

Homeowners said they are willing to take the risk of losing their home and bearing the cost of replacing the property.

“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,” Lary Farinholt, a 73-year-old retired attorney living in Los Angeles, told the Journal.


Foregoing homeowners insurance carries considerable risk, according to financial experts. A woman sifts through the damage caused by a tornado in Perryton, Texas, on June 16.
Forgoing homeowners insurance carries considerable risk, according to financial experts. A woman sifts through the damage caused by a tornado in Perryton, Texas, on June 16.
AP

Farinholt said he hasn’t had his 1,100-square-foot property insured for the past 25 years.

Forgoing homeowners insurance has allowed Farinholt to save more than $50,000, he told the Journal.

Financial advisers are cautioning homeowners of the risk of not having an insurance policy, particularly in light of extreme weather events that have become more commonplace.

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“It is a risky proposition to go without home insurance, and you need to fully understand the financial consequences if you lose your home,” Noah Damsky, an LA-based financial adviser, told the Journal.

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