Going bare: when to self-insure (and when not to)

Guest Commentary

Posted 3/13/24

As Southwest Florida homeowners continue bouncing back from the widespread impact...

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Going bare: when to self-insure (and when not to)

Guest Commentary


As Southwest Florida homeowners continue bouncing back from the widespread impact of Hurricane Ian, the impact of spiraling property insurance rates on household budgets is hard to ignore.

At roughly $6,000 a year on average, Florida’s typical homeowner insurance rates are now the highest in the country – between three and four times the national average, and in many cases three and four times what those same homeowners were paying just a few short years ago.

That hefty hike has many toying with the idea of “going bare,” or self-insuring their homes. While the national rate for going bare is about 12%, here in Florida, it’s closer to 15% to 20%, according to estimates.

In some cases, the numbers are unimaginably high. We’re seeing reports of insurance premiums for multi-million-dollar homes in the hundreds of thousands of dollars. For example, a homeowner on Florida’s East Coast was billed $121,000 annually in 2023, a 13-fold increase over just four years.

Before going bare, my top question for homeowners experiencing a rise in their property insurance is, “why aren’t you shopping around?”

We shop for cars, houses, groceries and gas to get the best deal, so why are we not shopping for insurance? If you get a notice that your homeowner’s insurance is increasing by $200 per month, challenge the company and tell them you’re going to find a better deal. In many situations, the company will lower the rate if it means keeping a loyal, long-term customer.

If you can’t find a better price, you may consider going bare. However, bear in mind that self-insuring your home (especially here in Southwest Florida, with an elevated risk of severe weather) is not without risk, and depending on your circumstances, may not even be a viable option.

Who can afford to go bare?
For those with an outstanding mortgage, banks require property insurance coverage as a condition of the loan. Homeowners who have paid fully for their homes, though, have the option to go bare if they’d like to forego homeowner insurance. In Florida, where 44% of homeowners paid for their homes in cash, that’s a significant cohort.

Additionally, if you live in an area that is at risk for floods, such as Fort Myers Beach, there’s a good chance that your mortgage holder will also require wind and flood insurance. Also, if you rent out your property on VRBO or Airbnb, or have frequent visitors, homeowner’s insurance is recommended, as it provides liability protection if someone gets injured on your property and chooses to take legal action. And if your lender winds up purchasing what is known as lender-placed or force-placed insurance, the premiums will typically be higher than what you find on the open market.

As more and more cash buyers choose to go bare, I hear a recurring sentiment: unhappy with how their insurance companies paid out for post-Ian repairs, these property owners instead prefer to put their own money aside each month to create, in essence, their own self-insurance policy.

Should you go bare?

Self-insurance is not as golden as it may seem. The biggest risk for Floridians, of course, is that without insurance, a catastrophic storm could cause more damage costs than the non-insured homeowner can afford to pay out-of-pocket. For Southwest Floridians who live in a region prone to storms, you should consider your track record with storms. Are you in a flood zone? How did your home fare during Hurricanes Irma, Ian and Charley?

Sure, self-insurance can save you a lot now, but what about the future? Do you have the funds necessary to repair a severely damaged home? All risks considered, more and more Floridians are willing to accept financial responsibility in exchange for drastically rising rates and high deductibles.

Everyone’s circumstances differ. The choice for owners of a mortgage-free mobile home that was passed down through the generations will very likely be different than for the owners of a multi-million-dollar penthouse on Gulf Shore Drive who retired early after selling their tech company

Before deciding to forego homeowner’s insurance, make sure to consult a financial advisor, your accountant and your real estate agent. At Call it Closed International Realty, we have a mortgage services division that offers competitive loans in each of the 50 states. The program is affiliated with Brighton Bank, a 110-year-old, FDIC-insured financial institution that offers conventional mortgages as well as FHA and VA loans.

About the Author
Aprile Osborne, Call It Closed International Realty co-founder, has been a licensed agent in Southwest Florida for almost 20 years. Naples-based Call It Closed International Realty currently operates in 18 states. For more information, visit aprileosborne.callitclosed.com.

Hurricane Ian, homeowner's insurance, self-insured, self-insuring, going bare