The Hidden Dangers of Skipping Homeowners Insurance: What Happens When You Don’t Buy Coverage

Homeowners Insurance Costs Skyrocketing

With homeowners insurance costs skyrocketing lately, more Americans are considering forgoing coverage to save money.

The Rise of Home Insurance Costs

After double-digit increases last year, home insurance rates are expected to climb another 6% this year, according to Insurify, a comparison-shopping platform. Experts say the effects of climate change — compounded with the typical inflationary pressures of late — are largely to blame.

The Impact on Homeowners

The latest data from the Insurance Information Institute (III), an industry trade group, shows 88% of homeowners are covered, but that figure has fallen from upwards of 95% just a few years ago. The dip can mostly be attributed to homeowners skipping home insurance coverage due to rapid price increases. In some cases, though, insurers are pulling out of high-risk areas, leaving residents in a scramble to find replacement coverage.

Average Annual Insurance Premium

By the year’s end, Insurify estimates the average annual insurance premium will exceed $2,500, though residents of states susceptible to tornadoes, hurricanes and wildfires should brace for rates much higher than that. In hurricane-prone Florida, for example, annual rates are expected to climb above $11,700 — by far the highest in the nation.

Why Home Insurance Is Essential

But that’s no excuse to skirt coverage altogether. “Going bare” — industry jargon for eschewing homeowners insurance — “spells financial ruin for most homeowners,” says Worters, who spoke with Money in October 2023.

Is Home Insurance Required?

Technically speaking, homeowners insurance isn’t legally required anywhere in the U.S. However, the vast majority of homeowners have a mortgage. And almost all mortgage lenders require homebuyers to maintain home insurance coverage as part of the loan terms.

What Happens If You Don’t Have Homeowners Insurance

Skipping home insurance may sound like a way to save money, but experts say the consequences of doing so could wind up being far more costly. Forced coverage, facing disaster on your own, and costly bills with no coverage are just a few of the risks you may face.

Forced Coverage

According to the Consumer Financial Protection Bureau, if your mortgage lender requires that you have homeowners insurance and you choose to ignore that, the mortgage company can take out a policy on the home and charge you for it anyway. This process is called “force-placed” mortgage insurance, and it usually comes with a hefty price tag.

Facing Disaster on Your Own

It may sound obvious, but if you forgo homeowners insurance and your home is damaged by a tornado, hurricane, wildfire or other disaster, you’re financially on your own.
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