7 Pros and Cons of Following Suze Orman’s Decision to Ditch Home Insurance

Suze Orman has a bone to pick with home insurance companies. The personal finance expert was quoted a whopping $28,000 yearly price tag for her condo in Florida — so she decided to ditch the insurance altogether.

Instead, she opted to self-insure. But Orman laments that most Americans can’t afford to make that same smart homeowner decision. 

Should you ditch it too? Here are seven pros and cons to consider before saying goodbye to home insurance.

When you decide to self-insure, you opt out of buying an insurance policy and instead pay for future repair or replacement costs out of your own pocket. Typically, you would set aside money each month in a savings account for this purpose.

Suze Orman says she’s declined to buy home insurance for her 2,100-square-foot Florida condo because of the steep cost ($28,000 per year). She also predicts an insurance company would contest any claims she made, which would make it challenging to cash in on her policy should she face repair costs.

It should be noted that Suze Orman is well off — reportedly, her net worth is $75 million. Orman can afford to self-insure if her condo sustains serious damage. For others, it may not be so practical.

Severe weather events are becoming more and more frequent, and more people than ever live in areas that are susceptible to these types of natural disasters. As these things go up, insurance companies typically raise rates to keep up with the amount of claims they’re receiving.

Premiums are also rising as the costs of repairing a damaged home become inflated. The price of materials has risen, as has the cost of labor.

Considering these factors, does opting to self-insure make sense for you? Keep reading for the things that may affect your decision.

If your home isn’t in need of a repair that would have been covered by your insurance, you’ll pocket the money you would have paid in premiums to the insurance company. You might also earn interest on the money you save if you keep it in a high-yield savings account.

When you file an insurance claim, you must collect proof, and you’ll also have paperwork to complete, phone calls to make, and a meeting with an insurance adjuster.

On top of that work, you may need to wait to receive your payment, that is, if your claim is approved in the first place. For example, in Florida, insurers have up to 90 days to approve or deny your claim. That’s up to three months of waiting while your home is damaged or in an unlivable condition.

If you opt to self-insure, you can simply use what you saved to pay for any damages.

If you self-insure, you can choose which dangers to protect yourself against to fit your needs. Maybe you want to buy personal liability insurance in case someone is injured on your property.

The premiums you aren’t paying to a home insurance company could go toward covering the cost of insurance for another asset.

Insurance companies exist because many people prefer having the peace of mind of knowing they won’t have to come up with thousands of dollars to repair any damages. You should be sure you have funds readily available to absorb the costs if such damage occurs.

You could be looking at $8,000 at least to replace your roof if it’s heavily damaged, $10,000 to repair windows and siding, and at least $4,000 to clean up water damage from flooding. This can be challenging to cover without liquid assets.

Most home insurance policies come with personal liability coverage. This protects you from things such as lawsuits if someone were to be injured on your property or you damage someone else’s property. If someone living in your home causes damage to another person’s property, you’d also be covered with this insurance.

If you aren’t insured, you will be responsible for potential court costs and any financial judgment against you. You’ll also have to cover any repair costs out of your own pocket.

Self-insurance isn’t a great option if you’ll be forced into major debt to pay for the damage to your home.

If you’re unable to set aside money as you planned and can’t afford the costs of repairs, you may need to borrow money. If you have to go into debt to cover the costs, it could be detrimental to your financial future.

Anyone who has a mortgage will need home insurance — the purchase of an insurance policy is usually required by mortgage lenders. For this reason, self-insurance is usually only possible if you own your home outright.

According to the most recent data from the National Association of Insurance Commissioners, the average home insurance premium increased by 7.6% from 2020 to 2021. While it may be tempting to ditch these costs, buying home insurance could be smart unless you’ve paid your home in full or have enough money to quickly access in case of emergencies.

You can prepare yourself financially by finding ways to lower your home insurance costs. Shop around for the best value and consider raising your deductible so you pay a lower premium. You might also invest in ways to better physically protect your home from disasters, such as by updating your plumbing and electrical systems or reinforcing your roof.