Many American home and car owners experienced significant insurance rate increases in 2022 and 2023, leading some consumers to opt out of insuring their homes and cars altogether.
But going without insurance is a serious gamble; not only are you leaving your property unprotected, you’re leaving yourself on the hook for tens or even hundreds of thousands of dollars if you are found liable for damage to someone else or their property.
So why are people going without insurance?
According to Robert Hartwig, a professor of risk management and insurance at the University of South Carolina, insurance costs are going up for a reason — actually a few.
Inflation is a driving factor for both home and auto coverage, but homeowners are being impacted by the increased frequency and severity of catastrophic events like wildfires and hurricanes (which are only going to get more frequent as the effects of climate change worse). [1] He also states that many homeowners are choosing to move to areas that are especially vulnerable to natural disaster risks, which can increase the cost of home insurance.
For auto insurance, price increases are also caused by expensive vehicle technologies driving vehicle repair costs and an increase in the number of claims. But expensive insurance rates are leading some people to skip coverage altogether.
“Lower income homeowners [may] not be compelled to purchase homeowners insurance coverage because they own their home outright and they may feel that the family’s limited resources are better spent on necessities.” says Hartwig.
But that isn’t the only reason people might choose to go without insurance. In fact, for some people, it’s the opposite. According to Hartwig, “Others may simply not have an accurate understanding of the risks they face. Higher income households may feel they have the resources to retain any repair and rebuilding costs they may incur.”
How bad are the insurance price increases?
Like everything else, the cost of home and auto insurance has increased over the last few years. However, insurance rate increases have significantly outpaced inflation.
NPR reports that auto insurance costs jumped more than 19% in the last year, while overall inflation was only 3.7%. [2] The increase in home insurance costs is even worse; according to CNN, dwelling rebuilding and replacement costs went up 55% between 2019 and 2022, and reinsurance rates have gone up between 30% and 40% due to higher than average losses several years in a row. [3]
These price increases are being passed along to the customer, driving up prices at a time when few people can afford the additional cost, which is pushing many people to go without insurance altogether. [4]
The risks of driving without auto insurance
Auto insurance is required by law in almost every state but even still, one out of every eight drivers chose to go without insurance, a 2019 policycentral survey found. This was true even before the current levels of inflation, with upwards of 25% of drivers in some states choosing to go without auto insurance.
And as the cost of insurance continues to climb, the percentage of people driving without insurance is likely to keep going up, too. A 2023 policycentral survey of nearly 3,000 drivers found that 17% of drivers under the age of 34 had gone without auto insurance in the past year, while another 28% have seriously considered it as a possibility.
Additionally, 43% of U.S. drivers reported paying more for car insurance in April of 2023 than at the same time the previous year, which isn’t surprising since the cost of cars and car parts rose significantly from 2020 to 2022 and the average inflation rate was 8%. [5]
What happens if you leave your home uninsured
It isn’t just drivers going without insurance; 12% of homeowners are also uninsured, according to the Insurance Information Institute. [6]
For some people, the increased cost of home insurance is enough for them to take the risk of paying for damages out of pocket, especially if they no longer have a mortgage. Others may have had their coverage canceled by their insurer and simply decided not to go looking for a new policy yet.
The increase in natural disasters in many areas has led some insurers to stop writing new home insurance policies in certain states, or even pull out of some insurance markets completely. For example, Farmers Insurance, Bankers Insurance, Centauri Insurance, and Lexington Insurance have all withdrawn from the homeowners insurance market in Florida, while more than a dozen property and casualty insurance companies have gone insolvent or pulled out of the Louisiana insurance market. [7] [8]
And it’s not just Gulf Coast states that are losing insurance companies due to natural disasters. The increase in California wildfires has contributed to both State Farm and Allstate pausing all new homeowners insurance business in the state. [9]
Where you live matters
Both home and auto insurance rates are based on a number of factors, including where you live. Insurance rates take your location into consideration because claims are impacted by things like crime statistics, property value, and weather-related damages.
Because of this, residents of states that have more natural disasters, like hurricanes and wildfires, pay higher rates for home and auto insurance.
For example, hurricane-ravaged states like Florida and Louisiana have the highest auto insurance rates in the country, while Oklahoma and Nebraska have the highest rates for homeowners coverage, due in large part to their location in tornado alley.
How to save money on home and auto insurance
Most people don’t want to be uninsured, but the increased costs have pushed property insurance out of reach for many Americans. For people who want to insure their home and their vehicles but don’t think they can afford it, there are still ways to keep insurance costs low.
For people who have both home and auto insurance, bundling those insurance policies together can provide a discount and raising deductibles on one or both policies can also help reduce insurance rates. And no matter what type of coverage you have, comparing quotes from multiple companies is the best way to make sure you get the best possible rate.
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