A new report by Consumer Federation of America (CFA) reveals that over six million homeowners lack homeowners insurance, leaving them dangerously unprotected from natural disasters and other significant damage that might happen to their homes. The report estimates that 7.4% of all homeowners in the country are uninsured, accounting for at least $1.6 trillion in unprotected market value. Known as “going bare,” CFA warned that the problem of uninsured homes is likely to get worse in coming years without significant investments in climate change adaptation and stronger oversight of the insurance industry.
“Being uninsured poses a potential threat not only to individual homeowners but also to communities and our national housing stock,” CFA explains in EXPOSED: A Report on 1.6 Trillion Dollars of Uninsured American Homes. “Being uninsured can foster deeper economic precarity for millions of homeowners across the country, especially those with lower incomes, and it is an important contributor to racial inequality. Inequalities in who has homeowners insurance will likely widen the long-standing racial wealth gap, as uninsurance disproportionately impacts Hispanic, Black, and Native American homeowners. Over time, insurance access is likely to become a key decider of who can fully reap the benefits of homeownership, including maintaining their home and building wealth.”
Using data from the American Housing Survey and American Community Survey, CFA found:
- One in thirteen American homeowners are uninsured—approximately 7.4% – living in about 6.1 million homes.
- Homeowners earning under $50,000 per year are twice as likely to lack insurance compared to homeowners in general. Among lower-income homeowners, 15% are without coverage.
- Certain demographics of homeowners are disproportionately at risk. 22% of Native American homeowners, 14% of Hispanic homeowners, and 11% of Black homeowners have no insurance.
- 35% of owners of manufactured homes and 29% of homeowners who inherited their homes lack coverage.
- Rural homeowners, those living in the metropolitan areas of Houston and Miami, and in Mississippi, New Mexico, and Louisiana are most likely to not have homeowners insurance.
- In 2021, an estimated $1.6 trillion in property value of homes lacked coverage. This includes $339 billion of uninsured Hispanic-owned homes and $206 billion of uninsured Black-owned homes.
“Many consumers are struggling to afford rising premiums and must go without homeowners insurance,” said Sharon Cornelissen, PhD, CFA’s Director of Housing and co-author of the report. “That puts them at risk of losing everything. One storm or wildfire means they have to go into deep financial debt to repair their home, live with unsafe and inadequate housing, or even become homeless.”
The report concludes with the following recommendations:
- State insurance regulators should collect more data to track homeowners insurance gaps and inequalities in insurance markets. Despite decades of proposals, regulators have consistently failed to collect granular and timely data needed for research, and so information and analysis about homeowners insurance is in its infancy.
- Problems in the homeowners insurance market pose a systemic threat to housing markets, and solving them will require extensive investments in mitigation. States and the federal government need to substantially increase investments in community risk reduction, home fortification and loss mitigation, and develop strategies to reduce insurers’ overreliance on unregulated, global reinsurance.
- Regulators should collect more information about racial homeowner insurance gaps. Historical work about racial discrimination in insurance markets has demonstrated the broad incidence of insurance “redlining,” similar to the denial of mortgages in Black and Hispanic communities. Insurance companies have not been held accountable for this; more research should be done and regulators should use existing Fair Housing laws to investigate these gaps, and if needed, to correct them.
“Insurance is an essential part of homeownership, financial security, and community resilience. When millions of American families simply cannot find or cannot afford insurance coverage for their home, we are all exposed,” said Douglas Heller, CFA’s Director of Insurance. “Not only are uninsured families unprotected, but the economic fabric of entire communities is also at risk if significant portions of residents cannot rebuild after a disaster. Our study should be a wake-up call for lawmakers, insurance and housing regulators, and the nation’s emergency management agencies.”