If You Can Afford Self-Insuring In Florida, It May Be Worth It

Earlier this week we learned 50,000 Florida homeowners would be dropped by their current home insurance carriers upon policy renewal. The three carriers shedding some of their Florida policies are Gulfstream Property and Casualty, Southern Fidelity, and Universal Insurance. The problem for those carriers comes down to carrying too much risk within their portfolio of business.

Insurance carriers must be able to prove they can pay out claims and must maintain specific standards to qualify for reinsurance which is required during times of emergencies. As storm-related risks have risen higher than ever, with Florida considered the riskiest state for a natural disaster in the country, combined with record-high home prices, it’s a recipe for potential problems.

Fewer carriers mean fewer options which means higher prices. This might be a time for some who’ve paid off their house to consider weighing their options. 

I prefer to self-insure when and where you can. In other words, if you can afford the cost of a worst-case outcome from something that's insured, you probably shouldn't pay to insure it. Instead, save and invest the money you'd pay in premiums to yourself and create your own insurance fund that you reap the benefits of overtime. 

The average American spends 12% of their gross earnings on insurance products. That means that the average household spends around $8,000 on insurance per year. Then consider for something like home insurance how much you’re paying for your policy, how much the deductible is, and your history of claims.

No doubt it’s a risk to self-insure and you need to be in a position to be able to afford to do it, however the value proposition, even in risky South Florida most often historically would be to your benefit. The average Florida policy is 32.5% higher than five years ago and prices are only heading higher. As major Florida insurers are rebalancing it might be a good idea to rethink the way you do things too.

Photo by: Getty Images


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