Danielle Hale Chief Economist | realtors.com
When Jim Georgatos and his wife bought their home in Coral Gables, FL, in 1989, they were required to purchase homeowners insurance under the terms of their mortgage. Because Coral Gables has historically been prone to hurricanes and other wind events, he was also required to purchase separate windstorm coverage.
He continued to pay for both homeowners and windstorm insurance after paying off his mortgage in 2007, figuring they were sensible safeguards for his property and peace of mind. Then, in 2020, something changed: his windstorm coverage quote shot up significantly.
“In 2019, we paid about $5,800, and in 2020, we were quoted over $9,000,” says Georgatos. “I know insurance premiums spiked that year, but I think our increase was way above the average increase in South Florida.”
Rather than accept the higher cost, he decided to drop his windstorm insurance coverage.
“We can afford to rebuild without insurance,” he reasons.
Instead of paying these new exorbitant fees every year, he’s chosen to hope that a hurricane won’t hit his property too hard. He acknowledges the risk involved.
“I would not recommend this approach for everybody,” he admits.
Jim Georgatos dropped his windstorm insurance when rates spiked in 2020.(Jim Georgatos)
Why more Americans are going without home insurance
Having home insurance is generally seen as a common-sense safeguard; most lenders require it for a mortgage. However, for those who own their homes outright or who otherwise don’t need it, a growing number are opting out.
A 2024 Consumer Federation of America study found that around six million homeowners—or 7.4% of the homeowner population in the U.S.—have no homeowners insurance, up from 5% in 2019.
In some cases, homeowners go without insurance because it’s simply no longer offered due to increasing extreme weather events prompting companies to pull out of certain areas. In 2023, both Allstate and State Farm announced they would no longer be taking new homeowners insurance applications in California due to rising construction costs and wildfires.
“Many insurers are stopping coverage in certain places because of the risks associated with climate change and extreme weather,” says Gregg Barrett, CEO of property and insurance company WaterStreet.
Many insurers are raising rates instead of abandoning risk-prone areas. States disproportionately affected by climate change like Florida have seen steep rises in premiums. For example, the average cost of homeowners insurance has tripled over four years there.
In 2023 alone there was a significant rise; the average annual cost now stands at $2,230 compared with $1,096 in 2013—a notable increase within one year alone according to industry reports.
“Climate change leads to more frequent and severe natural disasters," says Nick Taylor from Better.com "increasing insurers’ payouts thus raising premiums."
The changing cost/benefit balance
While some reluctantly pay rising rates others simply cannot afford them anymore states Barrett: "If companies issue policies costs become unaffordable."
"Climbing housing &insurance costs pushed some into foregoing," adds Hannah Jones from Realtor.com® highlighting concerns particularly around Houston & Miami given high-risk exposure yet unsustainable prices forcing decisions on cover choices or lack thereof altogether even if funds might be available elsewhere making economic sense analysis prevail per Elizabeth Dodson HomeZada co-founder remarking ease at dropping policy lately prevalent than before .
Risks inherent lacking cover remain starkly outlined through potential heavy financial burdens post-disaster impacting wealth-building long-term stability warns Travis Hodges VIU by HUB cautioning adverse outcomes sans protection layers fundamentally necessary despite short-term savings allure posing systemic vulnerability overall especially low-income minority segments notably underserved disproportionately facing exclusion via inaccessible options or practical constraints leaving exposed scenarios evident per Dr Jennifer L Barkin Mercer University Medical School stressing non-negotiable essentials even amidst budget tightrope walks lived reality across board remains dire reminding thorough evaluations prudent aligning relevant tailored solutions effectively wherever feasible mitigating risks appropriately crucial end ensuring safer future prospects inclusive broadly benefiting all stakeholders involved ultimately aiming secure sustainable equitable housing landscape moving forward collectively responsibly together thoughtfully addressing evolving challenges head-on collaboratively striving best possible outcomes achievable shared vision unwavering commitment dedicated efforts ongoing consistently pursued rigorously tirelessly ahead positively impacting generations come assuredly so truly always evermore forever indeed!
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