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Should I Consider Self-Insuring My Home?

Right now, there is a lot of negative news out there about home insurance companies. Insurance carriers are leaving Florida in droves - from Farmers to Bankers to Lexington. And those that remain are steadily increasing their premiums substantially, sometimes doubling and evening tripling costs year over year! It's no wonder the idea of self-insuring one's home is gaining a lot of interest among residents of the Sunshine State.

Self-insuring is an alternative approach to protecting your home. It is a strategy where the homeowner chooses to insure the home themselves. In other words, they go without traditional insurance and they absorb the cost of any damage out of their own pocket.

But self-insuring your home isn't something to be taken likely. Making a major decision like this without taking the time to consider if you can truly absorb the potential costs could be devastating. So how do you know if you should consider going the self-insurance route? Here are a few thoughts:

Self-Insurance COULD be a viable option for you IF:

  • You own your home outright. If you have a mortgage loan of any type, the mortgage company will require you have traditional insurance.
  • Your land is worth significantly more than your home and you truly do not intend to rebuild. For example, if you have a $200,000 home on a $1 million piece of waterfront property, sale of the land in an emergency would easily cover your costs.
  • Lastly….and this is the most important one. You can truly absorb the costs of rebuilding your home from the ground up if there is an emergency. Replacement costs are above $200 per square foot today. If your home is 2,000 square feet, are you truly willing to trade the insurance premium for a potential loss to you of $400,000 or more? This could be the case if your net worth is substantially greater than replacement value of your home. But this doesn't apply to the vast majority of people.

Now if you still believe you are still a good candidate for self-insuring your home, then go for it…at your own risk, of course :)

And if you DO decide to self-insure, remember that self-insuring doesn't mean you should forego all types of insurance altogether. For example, I always recommend maintaining an inexpensive liability policy (costing hundreds), so that if someone gets hurt on your premises, you can handle an expensive lawsuit (which could cost millions!).

In the end, if you're simply not sure how to proceed or want to bounce some ideas off a local insurance professional, contact us anytime, we'll be happy to talk you through it! 

Kirk Ball is Owner & Principal Agent at Wren Insurance.