An alarming number of American homeowners are tempting fate by putting one of their largest assets at risk, and it’s what they’re not doing that has financial planners concerned.

A new report of the Consumer Federation of America (CFA) revealed that 1 in 13 American homeowners “bare themselves” by jumping home insurance. This short-term saving of money creates long-term risks by leaving homes vulnerable to unexpected disasters. But why do so many people forgo this coverage – and what can they do to protect their home affordably?

Don’t miss

For millions of people, not purchasing homeowners insurance is driven by cost concerns, misunderstanding of coverage, and for some, the conscious choice to drop insurance because they have paid off their mortgage and no longer have a lender to require coverage.

“Concerns are growing that many American homeowners are being forced by financial realities to forgo homeowners insurance,” the CFA said in its report.

“But experiencing homelessness puts consumers at risk of accumulating significant financial debt to repair their homes, having to live in unsafe and inadequate housing conditions, or going from homeownership to homelessness after a disaster.”

To avoid the worst-case scenario, it’s a good idea to balance your budget and your coverage needs without giving up on insurance altogether.

Hit by high costs, blinded by perception

Many uninsured homeowners cite rising insurance costs as a barrier, the report said. Premiums having increased regularly, particularly in areas prone to natural disastersthe monthly expense can be prohibitive, leading people to forgo it in hopes of never needing it.

Living outside of designated flood zones or in areas with low crime rates can also lead some homeowners to assume they are at no risk – a logic that can lead to huge financial consequences since disasters don’t always strike in the planned limits. The reality is that even in traditionally “safe” areas, wildfires, hurricanes, floods and other emergencies can still hit hard.

Some homeowners may not think the coverage they would get would be worth the cost or the effort of trying to find an insurance policy in the first place.

“In recent years, homeowners across the country have felt the pressure of rising rates, decreasing coverage, and declining availability,” the report said.

And for those who recently paid off their home, it’s tempting to eliminate an extra bill. But without insurance, they have to pay repair costs or a complete replacement in the event of a disaster.

Learn more: These 5 Magical Money Moves Will Move You Up the US Net Worth Ladder in 2024 and you can complete each step in just a few minutes.

No insurance: a risky money transfer

Not having insurance means facing the financial consequences of damage or loss alone. Here’s why it’s a particularly risky choice:

• Unpredictable costs: Natural disasters, such as floods And the firescan result in repair bills ranging from thousands to hundreds of thousands of dollars, or even the entire price of your home. Without insurance, homeowners cover these expenses entirely out of pocket.

• Limited federal assistance: Although the Federal Emergency Management Agency can offer some disaster reliefthe funds provided rarely cover the entire cost of reconstruction. Homeowners without insurance could find themselves financially devastated.

• Home Value Protection: Insurance not only provides peace of mind, but it can also help maintain the value of a home after unforeseen events if you opt for comprehensive replacement cost coverage. Lack of coverage can make it more difficult to recover losses or sell the property.

Coverage options without breaking the bank

Rest assured, there are ways to obtain home insurance at a reasonable cost.

All insurers assess risk differently, so get multiple quotes can lead to savings. Many also offer discounts for bundling home insurance with auto or life insurance policies.

Many states offer programs for homeowners who can’t find affordable coverage elsewhere. For example, high-risk areas often have requirements for equitable access to insurance. plans which provide basic coverage to those who cannot obtain it from standard providers.

For those who already have coverage but want to reduce their costs, there are simple ways to save.

Raising your deductible is one of the quickest methods, but make sure you can afford to cover the deductible out of pocket in the event of a claim. Many insurers offer discounts for the installation of security systems, storm shutters or fire roofs. These improvements protect your home and may trigger insurance reductions.

Maintaining a good credit history can also give you a head start on your premium, as many insurers take this into account when calculating premiums. Improving your score could even save you hundreds every month.

What to read next

This article provides information only and should not be considered advice. It is provided without warranty of any kind.