Is homeowners' insurance required? Why more than 6 million Americans don't have it (2024)
More than 6 million homeowners nationwide – including a large number of Native American, Hispanic and Black homeowners – do not carry homeowners insurance, putting them at extreme risk in the event of natural disasters or other significant damage to their homes, a new study has found.
The study by the Consumer Federation of America found that uninsured property accounts for 7.4% of all properties in the country and leaves $1.6 trillion in property value unprotected.
“Being uninsured can foster deeper economic precarity for millions of homeowners across the country, especially those with lower incomes, and it is an important contributor to racial inequality," the report said. "Inequalities in who has homeowners insurance will likely widen the long-standing racial wealth gap, as uninsurance disproportionately impacts Hispanic, Black, and Native American homeowners. Over time, insurance access is likely to become a key decider of who can fully reap the benefits of homeownership, including maintaining their home and building wealth.”
Findings in the study, which was an analysis of 2021 American Housing Survey data from the U.S. Census Bureau, included:
One in 13 American homeowners are uninsured – approximately 7.4% – living in about 6.1 million homes.
Homeowners earning less than $50,000 per year are twice as likely to lack insurance compared with homeowners in general. Among lower-income homeowners, 15% are without coverage.
Certain demographics of homeowners are disproportionately at risk: 22% of Native American homeowners, 14% of Hispanic homeowners, and 11% of Black homeowners have no insurance.
35% of owners of manufactured homes and 29% of homeowners who inherited their homes lack coverage.
Rural homeowners, those living in the metropolitan areas of Houston and Miami, and homeowners in Mississippi, New Mexico, and Louisiana are most likely to not have insurance.
In 2021, homes with an estimated $1.6 trillion in property value lacked coverage. This includes $339 billion of uninsured Hispanic-owned homes and $206 billion of uninsured Black-owned homes.
“Many consumers are struggling to afford rising premiums and must go without homeowners insurance,”said Sharon Cornelissen, the Consumer Federation of America's director of housing and co-author of the report. “That puts them at risk of losing everything. One storm or wildfire means they have to go into deep financial debt to repair their home, live with unsafe and inadequate housing, or even become homeless.”
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What can be done?
In its report, the Consumer Federation of America made several recommendations. They include:
State insurance regulators should collect more data to track homeowners insurance gaps and inequalities in insurance markets.Despite decades of proposals, regulators have consistently failed to collect granular and timely data needed for research, and so information and analysis about homeowners insurance is in its infancy.
Problems in the homeowners insurance market pose a systemic threat to housing markets, and solving them will require extensive investments in mitigation.States and the federal government need to substantially increase investments in community risk reduction, home fortification and loss mitigation, and develop strategies to reduce insurers’ overreliance on unregulated, global reinsurance. That is the coverage that insurance companies purchase to offload some of the risk they assume for their policy holders.
Regulators should collect more information about racial homeowner insurance gaps.Historical research into racial discrimination in insurance markets has demonstrated the broad incidence of insurance “redlining,” similar to the denial of mortgages in Black and Hispanic communities. Insurance companies have not been held accountable for this. More research should be done, and regulators should use existing Fair Housing laws to investigate these gaps, and if needed, to correct them.
"When millions of American families simply cannot find or cannot afford insurance coverage for their home, we are all exposed,”said Douglas Heller, the organization's director of insurance. “Not only are uninsured families unprotected, but the economic fabric of entire communities is also at risk if significant portions of residents cannot rebuild after a disaster. Our study should be a wake-up call for lawmakers, insurance and housing regulators, and the nation’s emergency management agencies.”
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Betty Lin-Fisher is a consumer reporter for USA TODAY. Reach her at [email protected] or follow her on X, Facebook or Instagram @blinfisher. Sign up for our free The Daily Money newsletter, which will include consumer news on Fridays,here.
Your mortgage lender will require homeowners insurance
That's because lenders need to protect their investment. In the unfortunate event your house burns down or is badly damaged by a hurricane, tornado or other disaster, homeowners insurance safeguards them (as well as you) against financial loss.
“Many consumers are struggling to afford rising premiums and must go without homeowners insurance,” said Sharon Cornelissen, the Consumer Federation of America's director of housing and co-author of the report.
Why homeowners insurance rates are rising. Several factors are making homeowners insurance more expensive: The increase in the number and severity of hurricanes, floods, tornadoes and other harsh weather has led to a spike in claims in many parts of the country.
Your house may have an aging electrical system, cracked foundation, or leaky roof. Whatever the case — or cases — may be, insurers might raise your premiums to help offset the cost of potential claims. They may even deny you homeowners insurance if you don't update or repair your house.
If your mortgage lender requires it and discovers your home isn't insured, it could initiate foreclosure, resulting in the loss of your home. Or the lender might simply force you to get homeowners insurance by getting new coverage for you and adding it to your monthly mortgage payments.
Cost: One of the primary drawbacks is the cost of home insurance. ...
Deductibles: Home insurance policies often come with deductibles, which means you need to pay a certain amount out of pocket before the insurance coverage kicks in.
Therefore, the wealthy may have to purchase larger amounts of insurance because they may be liable for payments commensurate with the value of their total wealth, and not necessarily limited to the value of the property insured. In other words, the distribution of potential losses depends on wealth.
Turns out, homeowners insurance isn't required by law. But just like buying sunscreen, it may help you avoid a helluva lot of trouble in the long term. Whether you're thinking of buying a house, or you're already in the process, homeowners insurance is definitely a term you'll come across.
More Americans are declining to buy home insurance due to increasingly expensive premiums — leaving them at considerable risk of losing their home and personal belongings in case of a disaster.
WASHINGTON, D.C. (NewsNation) — Days after a major insurance provider announced it was pulling out of Florida due to environmental risks, State Farm Insurance announced Thursday it is recommitting itself to the residents of the state, NewsNation has learned.
Unfortunately, home insurance rates will continue to soar in 2024, according to Insurify's analysis. Annual home premiums are expected to jump by an average of 6% nationally, from $2,377 to $2,522. The rate hikes are projected to reach as high as 23% in some states.
In the housing market, an uninsurable property is one that the FHA refuses to insure. Most often, this is due to the home being in unlivable condition and/or needing extensive repairs.
Legally, it is acceptable to not have home insurance in California. You will not face any legal consequences, although you may be in breach of the terms of your mortgage agreement.
Lenders will also require you to obtain insurance coverage again promptly to rectify this breach. Recalled Mortgage: In the worst-case scenario, if you do not address the insurance lapse promptly, your mortgage could be recalled. This means that your lender demands full repayment of the mortgage amount immediately.
While there isn't a minimum home insurance requirement in California, additional wildfire, earthquake and flood insurance may need to be purchased depending on your home's exact location. Always check with your agent for guidance on the appropriate levels of homeowners insurance.
Make sure you're covered for the right amount – your home insurance policy should cover the full value of your home in case of damage or destruction. When it comes to home insurance, you want to make sure you're getting the right amount of coverage.
What happens to your mortgage if your house is destroyed by fire? The lender doesn't cancel your loan. But your insurer should eliminate the obligation by paying off your balance.
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