ORLANDO, Fla. —A recent survey by the Insurance Information Institute found more Floridians are self-insuring their homes because of the rising cost of insurance.
“It is very risky for homeowners to self-insure,” Tasha Carter said.
Carter is Florida’s Insurance Consumer Advocate. She said she is speaking with people every single day who are receiving notices in the mail that show a double or triple-digit increase in their insurance premiums.
“Many individuals are concerned that they may be priced out of their homes,” she said.
According to the Insurance Information Institute study, Florida’s home insurance is the highest in the country at an average of $6,000 per year versus the U.S. average of $1,700 per year.
That is why the survey also saw more Floridians are self-insuring, going from 8% of homeowners in the state in 2016 versus now it is up to 20%.
So, what exactly is self-insuring?
It is when a homeowner decides not to buy insurance, and instead, they save that money and put it in a savings or investment account in case they need it.
Usually, the only people who can self-insure are people who own their own home outright since mortgage lenders typically require homeowners insurance.
Carter broke down the top three reasons self-insuring is risky:
1. “Most homeowners just don’t have the available funds to be able to cover a catastrophic loss. For example, if your home completely burns down due to a fire, how many homeowners actually have the necessary funds available to be able to rebuild that home in its entirety?”
2. “It’s very hard to adequately predict or prepare for an unforeseen circumstance, so you don’t really even know how much money you should even be putting aside in the event that there is a catastrophic loss that occurs.”
3. “There are some aspects of a homeowner’s insurance policy that homeowners just can’t simply replace when they self-insure. One example is the liability coverage that is included in a homeowner’s insurance policy. And that liability coverage protects the homeowner in the event that someone is injured on their property and decides to sue the homeowner.”
Carter said other options homeowners should consider instead of self-insuring are:
Bundling insurance policies
Increasing deductible
Looking for discounts (for example, discounts for having a home security system or mitigation features)
