1. Can I drop my homeowners policy? If you have a mortgage, the answer is probably "no." Because you have a lien on the property, most home loans require you to have coverage that the lender finds suitable. If the policy lapses, you can be in mortgage default. If you are having trouble finding an insurer or paying the premiums, call your lender to see if it can offer suggestions and/or work with you to solve the problem.
2. Can I afford to regularly put money into an account to cover any storm damages? This is a necessity if you're going to drop your insurance coverage. Without the emergency self-insurance account, you'll either be stuck not making repairs, borrowing money to make them or putting them on credit cards, which could create additional problems.
3. How large should my self-insurance account be? Sit down and do a worst-case scenario in the event of a natural disaster. Consider what it will cost to repair or replace your home or major parts of it, such as your roof or walls that are more exposed to potential damage.
Then there are your belongings: furniture, clothing, food, exterior buildings, landscaping, and potential costs of debris removal or demolishing partially standing structures that need to come down for safety reasons.
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