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Thinking about going bare? What to know before you cancel your property insurance

With the price of premiums doubling the past few years, some Florida homeowners are choosing to go without property insurance, figuring that the savings are worth the risk of going bare in a hurricane-prone state.

“We are seeing many people doing this,” said Sunem Hernandez, of Hernandez Insurance, an independent insurance agent in Miami Lakes. “I have five clients that have already done it.”

Florida leads the rest of the nation homeowners shedding coverage. According to the Insurance Information Institute, 15% to 20% of Florida homeowners are forgoing coverage, more than the 12% national average.

KNOW MORE: High costs force some homeowners to choose: Drop insurance, sell or leave Florida

And the trend is being fueled by the fast increase of insurance costs in the state, the nation’s highest. Florida’s insurance policies — including windstorm coverage, but not flood protection — averaged around $6,000, 42% higher than in 2022, according to the institute.

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Agents consulted by the Miami Herald said rates are even higher in South Florida, where the market is said to be in a state of crisis.

The $6,000 per year amount is really at the bottom of prices being quoted, with homeowners finding few choices given the reluctance of insurance companies to offer coverage in the area.

“I have never seen something like this in the market, not even ... Andrew,” said Hernández, referring to the 1992 hurricane that destroyed parts of South Miami-Dade and setting off record-high damage.

Who is going bare?

Many in Florida are canceling their homeowners insurance policy. Who can save money on premiums? Is it worth risk of storm damage or destruction?
Many in Florida are canceling their homeowners insurance policy. Who can save money on premiums? Is it worth risk of storm damage or destruction?

People ditching their coverage are mostly homeowners who don’t have a mortgage, which requires insurance coverage. Those going bare include homeowners who have paid off their loans in full, including retirees.

But insurance agents say they are now seeing clients acquiring separate loans that do not list the property as collateral, and they use the money to pay off the mortgage to free themselves from the requirement to obtain coverage. For the most part, wealthier people are in a position to borrow large amounts using other types of assets as collateral, such as businesses, stocks and bonds, land, or large bank accounts.

Why do property owners drop their coverage?

Besides the high cost of policies, which is the most obvious reason, surveys by the industry point to cases in which homeowners who don’t have a mortgage cancel policies just because they can.

But the insurance industry’s reputation also plays a role in the decision.

“The insurance industry doesn’t have the most stellar reputation when it comes to pleasing every customer,” Patrick Wraight, director of Insurance Journal’s Academy of Insurance, wrote in a column for Insurance Journal. “This goes back to the complexities of insurance and how sometimes people think a loss should be covered and it just isn’t. It isn’t helpful either that sometimes, insurance people act poorly, incorrectly, and sometimes illegally.”

What to know if you consider dropping insurance coverage

No one is exempt from unforeseen circumstances that can damage or destroy your home. And you’ll be on your own to repair or replace. Agents say that the replacement cost of a home destroyed in a hurricane can surpass $300,000, and even if the dwelling is only partially damaged, you can be left with repairs costing several thousand dollars.

But standard insurance usually protect you from more than damage caused by wind and flooding during a storm, a fire, or other disasters. They also provide liability protection that help you cover the expenses of lawsuits or injuries on the property. Depending on the policy, this type of protection will cover your legal costs and any payments awarded against you in court.

While most of those considering dropping their coverage are thinking of saving money, doing so could mean financial ruin if tragedy strikes — unless they have the money accessible. Added to the costs of clearing the land of debris, rebuilding the house and finding another place to live in the meantime, a hurricane victim lacking insurance coverage in Florida can easily face expenses surpassing the value of the property.