Home Insurance Survey shows more Florida homeowners are self-insuring

Survey shows more Florida homeowners are self-insuring

by Cedric Guzman

A recent survey conducted by the Insurance Information Institute has revealed that more homeowners in Florida are choosing to self-insure their homes due to the increasing cost of insurance. This trend, however, is being viewed as a risky decision by experts in the field.

Tasha Carter, Florida’s Insurance Consumer Advocate, has been speaking with homeowners who have been receiving notices in the mail indicating significant increases in their insurance premiums. Many individuals are worried that they may no longer be able to afford their homes. According to the Insurance Information Institute’s study, Florida currently has the highest home insurance rates in the country, with an average cost of $6,000 per year compared to the national average of $1,700 per year. This substantial disparity explains why more Floridians are opting for self-insurance, with the percentage of homeowners choosing this option increasing from 8% in 2016 to 20% currently.

But what exactly is self-insuring? Self-insuring is when a homeowner decides not to purchase insurance and instead saves the money they would have spent on premiums, putting it into a savings or investment account in case it is needed. However, it is important to note that typically only homeowners who own their homes outright, without any mortgage, can choose self-insurance since mortgage lenders typically mandate homeowners insurance.

Tasha Carter emphasizes the three major risks associated with self-insuring. The first risk is that most homeowners simply do not have the available financial resources to cover a catastrophic loss. In the event of a complete loss, such as a home burning down due to a fire, the funds needed to rebuild the home entirely are often beyond the means of the homeowner. The second risk is the difficulty in adequately predicting or preparing for an unforeseen circumstance. Homeowners do not have a precise estimate of the amount of money they should set aside for a catastrophic loss. The third risk pertains to certain aspects of a homeowner’s insurance policy that cannot be replaced with self-insurance. For instance, liability coverage, which protects homeowners in the event of a lawsuit filed by someone injured on their property, is not available when self-insuring.

To address this issue, Carter suggests other alternatives homeowners should consider rather than self-insuring. These options include bundling insurance policies, increasing deductibles, and looking for discounts. For instance, homeowners may be eligible for discounts if they have a home security system or mitigation features installed.

In conclusion, the rising cost of insurance in Florida has led more homeowners to consider self-insuring their homes. However, experts warn that self-insuring is a risky decision, mainly due to the lack of financial resources to cover catastrophic losses, the difficulty in predicting unforeseen circumstances, and the inability to replace certain aspects of a traditional homeowner’s insurance policy. Homeowners are advised to explore other options such as policy bundling, higher deductibles, and seeking discounts to mitigate the financial risks associated with self-insurance.

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