By Marilyn Kennedy Melia, CTW Features
Fingers-crossed is not the best strategy.
About 13% of homeowners have dropped their homeowner insurance coverage, according to a survey from the Insurance Information Institute {III} and Munich RE, prompted by increases in monthly premiums.
Especially in areas of the country where fires and storms have spiked claims for home damages, coverage costs have spiked.
Some wealthy owners have decided to forego buying pricy coverage on their expensive home[s], electing to “self-insure” and cover repairs for damage to their home with their own funds.
But, notes Loretta Worters, III spokesperson, about 40% of owners without coverage had a household income of $40,000 or less.
Self-Insure To Your Limit
Even the very wealthy are taking too big a risk forgoing homeowner coverage, because it could be “astronomically expensive” to fund repairs, advises Jeff Rose, founder of GoodFinancialCents.com.
For both the wealthy and middle-income owners, “a safer bet might be to opt for a higher deductible to enjoy lower premiums while still having a safety net in place,” Rose adds.
Indeed, the deductible – or the amount an owner pays himself before the insurer will start covering damage costs – is like self-insuring to a limit. “You should base your deductible on your ability to absorb out-of-pocket costs,” says Bob Hertel of Acuity Insurance.
The typical deductible is $1000 and increasing it to about $5000 could save about 10 percent on monthly premiums, according to the III.
Exhaust Every Option
Purchasing auto and homeowner policies from the same insurer can save some costs for any homeowner.
For lower-income homeowners, call a homeownership counseling service [agencies listed at hud.gov], Rose suggests. While not all states offer insurance to lower income owners, as California does through its FAIR Plan, Rose adds, that ways to trim other housing costs may be available, like the Low-Income Home Energy Assistance Program {LIHEAP} to reduce utility costs.