The High-Stakes Gamble: Why Homeowners Are Ditching Insurance and What It Means for Their Future

Photo byRealtor.com; Getty Images

In the face of soaring insurance premiums and an ever-increasing risk of natural disasters, more homeowners are making the controversial decision to forgo home insurance. This growing trend reveals a high-stakes gamble that’s reshaping the landscape of property ownership across the United States.

The Rising Cost of Security

Jim Georgatos, a resident of Coral Gables, Florida, epitomizes this trend. After paying off his mortgage in 2007, Georgatos continued to invest in both homeowners and windstorm insurance. However, when his windstorm premium spiked from $5,800 to over $9,000 in just one year, he decided to drop the coverage, opting instead to self-insure and hope for the best.

“I know insurance premiums surged, but our increase seemed extreme,” Georgatos says. “We can afford to rebuild without insurance, so I decided to take the gamble.”

A National Trend with Local Impact

Georgatos’s decision reflects a broader national shift. According to a 2024 study by the Consumer Federation of America, approximately 6 million homeowners, or 7.4% of the U.S. homeowner population, now forgo insurance—up from 5% in 2019. This trend is particularly noticeable in high-risk areas affected by climate change, where insurance costs have become untenable for many.

In states like Florida, Louisiana, Colorado, and California, insurance premiums have soared, with Florida’s rates tripling over the past four years. Nationwide, the average cost of homeowners insurance has jumped from $1,096 in 2013 to $2,230 in 2024, with a 23% increase in the past year alone.

Climate Change and Insurance: A Complex Relationship

Climate change is a significant driver behind these skyrocketing premiums. Extreme weather events have increased insurers’ payouts, leading them to raise rates or withdraw from high-risk areas. Companies like Allstate and State Farm have halted new homeowners insurance applications in California due to rising construction costs and frequent wildfires.

“Insurers are retreating from riskier areas or drastically increasing rates due to climate-related risks,” says Gregg Barrett, CEO of WaterStreet. “This trend leaves many homeowners with tough choices.”

The Cost of Going Without

While skipping insurance might offer short-term savings, the risks are profound. Without coverage, homeowners face the full financial burden of repairs and rebuilding after disasters, potentially jeopardizing their financial stability.

“Opting out of insurance leaves homeowners vulnerable to unexpected damage and repair costs,” warns Hannah Jones, senior economist at Realtor.com®. The Consumer Federation of America estimates that $1.6 trillion in property is now at risk due to natural disasters and other perils.

Economic and Social Implications

The decision to forgo insurance disproportionately affects marginalized communities. The study reveals that uninsured homeowners are more likely to be from disadvantaged backgrounds, with Native American, Hispanic, and Black homeowners experiencing higher uninsured rates compared to their White counterparts.

“Being uninsured exacerbates economic precarity, especially for low-income households,” notes the report. “This issue also highlights broader racial and economic inequalities.”

Navigating the Insurance Landscape

Experts recommend that homeowners carefully evaluate their options before dropping insurance. Shopping around for competitive rates and ensuring coverage matches the risk level of their property can mitigate some of the financial risks.

“Despite rising costs, affordable insurance options are still available,” advises Elizabeth Dodson, co-founder of HomeZada. “It’s crucial to match your coverage to your home’s specific risks, such as flooding, which often requires separate insurance.”

For those navigating the complex world of home insurance, considering local agents and using environmental risk scores can provide valuable insights into managing insurance costs effectively.