‘I don’t have a mortgage’: Would it be irresponsible to drop my homeowner’s insurance? I can no longer see the value in paying $4,000 annually.

Is It Wise to Drop Homeowner’s Insurance?

“My deductible is $5,000.” (Photo subject is a model.) - Getty Images/iStockphoto

Dear Quentin,

I have a brief but significant question: Is it highly irresponsible to discontinue my homeowner’s insurance? The annual premium has reached $4,000, and I’m struggling to justify the cost. I own my home outright and my deductible is $5,000.

Homeowner

Popular Reads from MarketWatch

• The Social Security crisis could leave U.S. retirees worse off than those in poorer countries
• These 8 stocks could form the backbone of AI as chips get more powerful
• ‘I’m ready to walk away’: I have $400K in retirement savings and want to quit my job of 30 years. Can I do it?
• ‘It’s been a struggle getting payments from her’: I rent a house to our daughter. Do I just gift her the house?

Related:

Your home insurance premium is nearly twice as high as what most homeowners pay. - MarketWatch illustration

Dear Homeowner,

While canceling your homeowner’s insurance isn’t inherently reckless, it does expose you to significant financial risk unless you have a substantial emergency fund and a high tolerance for risk. If your savings wouldn’t cover the cost of major repairs or a total rebuild, or if paying out-of-pocket for a large claim would cause serious financial strain, skipping insurance could be a costly mistake. Insurance also provides peace of mind, knowing that if disaster strikes—like a storm damaging your roof or a fire caused by faulty wiring—you won’t be left facing overwhelming expenses or homelessness.

Standard homeowner’s policies protect against many, though not all, major hazards. Events like floods and earthquakes typically require separate policies. Still, insurance offers reassurance that you won’t be financially devastated by unexpected disasters.

According to a recent study, about one in seven owner-occupied homes in the U.S. lacks insurance. Many homeowners, like you, cite unaffordable premiums as the reason, while others are unable to secure coverage due to climate risks. This leaves many people choosing between paying ever-increasing premiums or risking severe financial loss by going uninsured.

The report notes, “This trend is especially pronounced in states such as Florida, California, and Louisiana, where insurers have either exited the market or dramatically increased rates in response to growing climate threats. With fewer companies offering coverage, homeowners often face limited and extremely expensive options. In some cases, premiums have doubled or tripled within a few years, making it impossible for many to keep their policies.”

Rising Insurance Costs

Your annual premium is significantly higher than the national average. Most Americans pay close to $2,500 per year for home insurance, according to a recent survey. That’s an increase of nearly 10% over the past three years. (This figure doesn’t include property taxes, which can vary from $1,500 to over $7,000 annually depending on location and property size.)

Since you don’t have a mortgage—congratulations, by the way—you aren’t required by a lender to maintain insurance. However, you alone are responsible for any losses, including property damage and liability claims if someone is injured on your premises. Owning your home outright doesn’t eliminate these risks. Forgoing insurance only makes sense if you have enough accessible funds to handle a worst-case scenario, which could mean covering costs in the thousands or even millions for liability.

There are ways to reduce your insurance costs. You can negotiate with insurers for lower premiums and better settlements. Ask about discounts for security systems, smoke detectors, energy efficiency, smart-home features, paperless billing, or being a nonsmoker. Bundling your home and auto insurance with the same provider can sometimes save you up to 20%. Raising your deductible may also lower your premium, but be sure you can afford the higher out-of-pocket cost if you need to file a claim.

A Treasury Department report released last year found that most policy nonrenewals are linked to rising costs from climate change. Nonrenewal rates were about 80% higher in areas most vulnerable to climate disasters. Insurance companies are also facing higher costs, sometimes paying out more in claims than they collect in premiums in high-risk regions.

If needed, consider working with an insurance broker. Keep searching and contacting different providers to find a policy that fits your needs.

Related:

My elderly cousin’s nursing home coerced her into changing her will — and selling her house. She was worth millions. Can they get away with this?

Previous Advice Columns by Quentin Fottrell:

• ‘I’m in a financial mess’: My income was cut in half. Do I sell my $600K home and kiss my 2.9% mortgage rate goodbye?
• I found an out-of-state buyer for my grandmother’s classic car. He wants me to cash a check. Is this a financial scam?
• ‘I’m in California and plan to stay here’: I’m 61, lost my job and live off my $425K IRA. My house has $650K in equity. Do I sell?
• My son’s credit-card company will write off $10K on a $25K debt. Should he accept or declare bankruptcy?

More Top Stories from MarketWatch

• Friday’s stock-market rally reveals what investors are really focused on in 2026
• My wife, 74, collects survivor benefits on her first husband. Can she now claim on her own Social Security record?
• 10 rock-solid financial rules to live by — no exceptions
• Mortgage rates drop below 6% for the first time in 3 years as Trump official says purchases of mortgage bonds are starting