Homeowners taking chances with natural disasters and other threats
The Wall Street Journal claimed that rising costs and misperceptions of risk are driving more and more American homeowners to forego home insurance coverage.
According to new figures from Bankrate, the average yearly cost of homeowner’s insurance with $250,000 in dwelling coverage has risen to $1,428. This is a 20% increase from the previous year.
Although, a poll conducted in 2023 by the Insurance Information Institute (Triple-I) and Munich Re found that 1 in 10 American homeowners did not have home insurance, with roughly half of those people having yearly family earnings of less than $40,000.
Larry Farinholt, a 73-year-old retiree from Los Angeles, is one among the growing numbers of homeowners who have opted to “go bare” after paying off their mortgage and seeing significant savings as a result of not renewing their policy.
According to Farinholt, the risk of burglary is low and natural disasters like fires and floods are not a concern in his area.
A loss of his home would be “financially devastating,” but he has enough saved to buy an apartment.
United Policyholders’ executive director Amy Bach claims that homeowners like Farinholt are deciding not to get insurance because they can’t pay the premiums at the moment.
Homeowners have been facing a double whammy of growing expenses and insurers’ refusal to renew insurance due to increased risks of severe weather damage.
Homeowners in states like California and Florida are particularly vulnerable since insurance companies in those states have been cutting back on coverage.
Some homeowners in disaster-prone areas have gone without insurance because they can’t afford the higher costs and lower coverage offered by state-run policies.
However, Los Angeles-based financial advisor Noah Damsky cautioned homeowners against forgoing home insurance, calling it a “risky proposition” and urging them to “fully understand” the financial repercussions of the decision.
The Wall Street Journal pointed out that homeowners who do not have insurance will have to deal with the emotional and financial fallout of a disaster like a fire, flood, or other catastrophic event, as well as the loss of their home and its contents.
