I recently learned about two separate occasions when families lost everything when their homes burned down. These are tragic losses and thankfully were the only items exchanged for lost items. No one was injured, but they woke up the next day with nothing but their clothes on their backs and no home to return to.
The real tragedy in these situations is that they do not seem to have any insurance on their properties. This means that instead of getting a hotel room, they are looking for friends and family for a place to stay until they find something else. Instead of shopping for some important things while things are starting to work out, they need to ask for donations and kindness to friends, family and strangers for their essentials. Instead of being able to work with contractors to remove debris and start rebuilding, all that is left is a useless property with a house shell on it.
Given the situation that this choice put them in, you would think that people would consider this when choosing not to buy insurance. Here are three reasons why people do not buy homeowners insurance when they do not need to.
It can be expensive.
I understand that. Insurance is not cheap. Of course, it also depends on several factors. I live in Florida, which in every way is one of the most expensive states in the United States for insurance. That does not make it any less valuable, especially when you come home and your house is on fire.
The cost of homeowners insurance is based on several factors. The first three are interconnected. Home size, construction type and reconstruction cost. It should make a lot of sense, but the bigger the house, the more expensive it will be to replace it. It just takes more material and time to rebuild. It also makes sense that different building materials cost more. Contract-class materials cost less than premium materials. Wood costs less than blocks.
The cost is also based on the location of the home. This is true in a few different ways. The costs of building materials and labor vary from city to city or state to state. Some property calculation tools have data down to zip codes for price differences in materials and labor. It can also change if the loss is related to a catastrophic event, such as a hurricane or wildfire.
The cost of insurance based on the site also means that some sites are more expensive to insure due to the risk of damage due to various covered causes of loss. Florida residents are paying more to protect themselves from hurricanes and floods than others could. In California, the risk of wildfire really affects insurance costs there. Particularly risky sites (for various reasons of loss) include barrier islands, coastal regions, wildfire areas, plains and lower elevations near bodies of water.
No one is forcing them to.
There are people who would not buy insurance if they felt they could get away with it. Don `t you think so? Look back to the introduction and your own memory. I guess you know at least one person or family who lost everything in a fire and had no insurance. Still not convinced? What is the situation of the uninsured motorist where you live? In Florida, it is estimated that about 1
When there is no compulsion to buy insurance, there are several people who choose to avoid the monthly cost and go without it. The only time coverage is mandatory is when there is a mortgage in place. With this in mind, it comes to me that people look at their homeowners insurance with two parallel thoughts that drive their decision not to buy it.
- Nothing major has happened so far and I do not know anyone who has had any major losses that the insurance would cover. The people I know who have had losses had so much trouble with their insurance company that it really is not worth paying for.
- I could take the money and use it for other things my family needs: a car payment, car insurance, food, clothes, etc.
It happens. People have to make choices sometimes and that means that if they are fired, there are people (more than we probably want to admit) who would choose to use their money differently when no one is forcing them to buy insurance.
the reputation of the insurance industry.
The insurance industry does not have the most amazing reputation when it comes to pleasing every customer. This goes back to the complexity of insurance and how people sometimes think a loss should be covered and it is not. It also does not help that insurers sometimes act badly, incorrectly and sometimes illegally.
Special thanks here to the groups responsible for the terrible reputation of the insurance industry.
- Thanks to the companies that try and humiliate their customers when what they have to do is stop arguing and pay the claim. You know you owe the money. We know you owe the money. Why not just go wrong with the serving and let everything wash out later? Companies would tell you that they only want to pay what they owe and that they have to work hard to prevent fraud. I wonder how it would play out if companies were a little more liberal when it comes to paying receivables. Can it cut down on the fraud they are so worried about?
- Thanks to the coverage lawyers who shout from their very expensive signs and TV commercials that insurance companies are out to cheat their clients. All this while receiving the big checks (their part of the big deal) so they can pay for their mansion, car and boat. My question is how much of the extra money they get for the "customer" goes back into their pockets rather than getting the customer more money?
- Thanks also to the public adjusters who seem to assume that all insurance companies are deceiving their customers. I know you can show me file after file where it is alleged to have happened, including several where it is actually true. I also know that your files are not all claims files and that most claims are resolved in a way that makes customers whole, if not really happy.
It is worth noting here that not all companies, lawyers, or public adjusters. But let's not kidnap ourselves, not all companies, lawyers or public prosecutors are the good citizens and neighbors they want the rest of us to believe they are.
In the end, even if this is the reason not to buy homeowners insurance, there is a really good reason to buy homeowners insurance. When the fire occurs, no one wants to have to look their family in the eye and wonder what should we do now?
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