One in 13 homeowners are committing a significant financial error.

With home insurance rates rising, homeowners are increasingly opting out of coverage.

Since 2019, the percentage of American homeowners without insurance has increased from 5% to 7.4%, according to a recent study by the Consumer Federation of America.

Due to the 23% increase in the average annual cost of homeowners insurance for a $300,000 mortgage to $2,230 in the past year, some homeowners are opting to do without insurance or allow their policies to expire in an effort to save money.

One disaster can put your financial stability at risk.

"Can I afford not to have homeowners insurance?" says Cathleen Tobin, a certified financial planner in New York.

Why you should always have home insurance

Not purchasing homeowners insurance is a significant error, according to Alaina Hixson, director of sales and operations at insurance company The Churchill Agency. Although home insurance can be expensive, it can also provide substantial savings, including thousands and even hundreds of thousands in certain instances.

Home insurance safeguards against significant threats such as fire, theft, and water damage, typically covering your dwelling, possessions, liability, and living expenses in the event of displacement.

On average, homeowners owe a deductible of about $1,000 or $2,500, and insurance covers any additional repairs, according to Hixson.

Homeowners who have paid off their mortgage or bought their home with cash may choose to skip or let their insurance lapse, leaving them vulnerable to costly repairs in the event of a disaster.

The number of natural disasters causing $1 billion in damage has more than quadrupled since the 1980s, according to the National Oceanic and Atmospheric Administration.

It is advised by experts to have sufficient insurance to cover the cost of rebuilding your home and replacing personal items based on current construction and material costs, rather than the market value. To keep premiums affordable, opt for a higher deductible, but make sure you have savings set aside to cover it if necessary.

Don't forget flood insurance

Flood damage is a significant risk in certain regions, but it is often overlooked because standard homeowners insurance policies do not typically include it. According to a recent survey by the insurance trade group Trusted Choice, approximately 50% of American homeowners are unaware that flood coverage is an additional policy.

Purchasing flood insurance as an additional policy is necessary to obtain coverage, whether through the National Flood Insurance Program or a private insurer.

Although flood insurance is not usually mandated by mortgage lenders unless the property is in a high-risk flood zone, many people still don't have it, according to Hixson.

She remarks that many people will be taken aback by how affordable flood insurance is, particularly in areas with lower risk.

Review your home insurance policy to ensure adequate coverage limits, perils included, and identify gaps, especially for flood risks.

Earn more money at work by taking CNBC's new online course on negotiating a higher salary. Expert instructors will teach you the necessary skills to increase your paycheck, including how to prepare, build confidence, communicate effectively, and craft a counteroffer. Pre-register now and use coupon code EARLYBIRD for a 50% discount through Nov. 26, 2024.

Sign up for CNBC Make It's newsletter to receive expert advice on work, money, and life.