That is, your uncovered exposure should not exceed 1/10 of your critical asset.
Let's say you have 10 units worth 1 million. The insurance for these 10 units is probably 10k. The average probability of residential fire damage is less than 1/100 per year, and the average damaged value is about 30k.
So in ten years your expected loss is 1 event, 30k, but you pay premium of 100k.
If you don't buy insurance, you may have fire that takes out a house, but you are still ok with 9, that will not change your financial position significantly.
Of course insurance is more complicated, not just covering fire insurance. But you get the idea.
Now, if you live in a place like Florida, you are likely to have correlated damages that damage several properties in a same year. In this case my calculation above does not apply. You have to diversify your risk first before stop paying insurance.
In the same consideration, if you have 5 10-unit multiunit buildings, you still have too much rist. You need 10 such buildings. Because a single fire can take out all 10 in a single event. We have a big fire a couple of years in a town that took out 20 units.
On top of that, you need to maintain sufficient cash liquidity to deal with the various cost of an un-insured loss. In my first example, you need to have cash ready for about 100k at any time.
