As we were about to sit down to dinner on a recent Friday evening, we heard a big boom.
“Was that a gunshot?” my husband asked.
It turns out that our neighbors’ giant picture window shattered, most likely from impact with a bird or rock.
Owning a home can feel like risky business, from coming up with the mortgage payment every month to worrying about disasters like fires or floods or tornadoes. Or even a pricey window.
But here is something riskier still: Going without home insurance in the United States altogether.
It is called “going bare,” and 12% of American homeowners report doing just that, according to a study from the Insurance Information Institute (III) and Munich Re. That is up from just 5% in 2015.
In some areas, it is estimated to be even higher than that – between 15-20% of homeowners in Florida, the highest percentage in the country, according to the III.
That means if disaster strikes, you are “self-insured” – a fancy way of saying you will have to find the funds to rebuild. Unless you happen to have hundreds of thousands of dollars just sitting around, that won’t be pleasant.
Going bare is still fairly uncommon: That is because if you take out a mortgage on the property, lenders typically require proof of home insurance.
And yet, some homeowners are choosing to take on this risk. One reason for that is sky-rocketing costs: Average home insurance annual premiums are now $1,759 per year for $250,000 of dwelling coverage, according to financial information site Bankrate.com. That is a whopping 23% more than a year ago.
Secondly, coverage may be hard to find, since some insurers are not writing new policies, or are pulling back altogether from high-risk areas. After all, they face their own rising costs, from severe weather events to increasingly expensive building materials.
As a result, some homeowners are taking the biggest bet and going without any coverage at all.
To avoid taking such a huge gamble, here are a few pointers.
As for my neighbors, they are still waiting for the window to be replaced. (It is a custom job.) The total cost will be thousands of dollars, but – luckily – much of it should be covered by homeowners insurance.
If you are a homeowner grappling with higher insurance costs, let me know your thoughts at onthemoney@thomsonreuters.com.
