Self-Insurance is On the Rise Among Homeowners — But Is It Safe?

With insurers pulling out of high-risk markets, homeowners are left scrambling for affordable solutions
A house destroyed in a tornado

Climate change isn’t news — it’s been worrying the scientific community for almost half a century. But now, as our warming planet experiences increased occurrences of wildfires and more intense storms, climate change has moved into the financial news cycle — thanks to its impact on homeowners insurance.

In the face of dramatically increased risk, many homeowners insurers have pulled out of disaster-prone areas entirely, leaving homeowners in places like California, Florida and Louisiana scrambling to find alternative coverage.

And even when insurance is still offered, their costs have sometimes skyrocketed to the point of infeasibility — leading homeowners to turn to self-insurance. Case in point, even personal finance guru Suze Orman recently cut ties with her homeowners insurance policy after being quoted $28,000 to insure her oceanside condo in Florida for a year.

Self-insurance may be on the rise — but is it safe?

Across the United States, the average cost of homeowners insurance is $126 per month, or $1,516 annually.

But when quoted five-figure prices that rival some peoples’ salaries, it’s no surprise that some homeowners may forgo insurance coverage and choose instead to augment their emergency funds — and keep their fingers crossed.

While homeowners insurance isn’t legally required in any U.S. state, most banks do require it as a prerequisite for a mortgage. And even if you own your home outright, going without insurance means leaving what’s likely your most valuable asset unprotected.

Still, according to 2024 data by the Consumer Federation of America (CFA), 7.4% of homeowners across America are uninsured, leaving an estimated $1.6 trillion worth of assets unprotected.

Those earning under $50,000 per year are twice as likely to be without homeowners insurance than the general population of homeowners — and minority groups, including Black, Hispanic and Native American homeowners, are also disproportionately impacted.

According to data collected by the Insurance Information Institute (III) between 2017 and 2021, the average property damage claim was around $15,000 — which, given Orman’s insurance quote, might actually be cheaper than paying for some of these extremely inflated policies. (Tellingly, according to a ValuePenguin survey, most filers say their claims were due to weather-related damages.)

Still, with about two-thirds of Americans living paycheck to paycheck and almost half admitting they wouldn’t be able to afford a $1,000 emergency expense, going without homeowners insurance could be a dangerous decision.

How to find afford homeowners insurance

While the changing landscape of homeowners insurance — and climate change itself — will continue to impact those who’ve made their lives in disaster-prone areas, there are ways to increase your odds of finding an affordable plan.

For instance, in Florida, a homeowners insurance policy from the most affordable insurer (Tower Hill) costs, on average, less than half what the most expensive (Chubb) does annually. Which is to say, shopping around for a quote can pay — literally.

And for those who are willing to relocate to lower their overall expenses, estimating your potential homeowners insurance cost by location can help. While it might not be a feasible option for those who are well established, for some, it may be worth considering.

Finally, keep in mind that legislators have not been blind to this problem — and new laws are being proposed that could, if passed, help increase the accessibility of homeowners insurance for all Americans. Because whether it’s an oceanside condo or a California bungalow, your home sweet home is worth protecting.

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