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Texas home insurance rates rising fast

A property insurance crisis that began in Florida and spread to Louisiana is now causing havoc in Texas, with homeowners facing soaring home insurance rates and fears that more Texas homeowners insurance carriers will pull out of the state.

“I had a customer call this very morning saying she was facing a 60% increase in her [home insurance] renewal costs,” says Ron Wadley, founder and co-owner of Insurance for Texans, an independent brokerage in the greater Dallas-Fort Worth region. 

The customer had had three hail claims in the past two years (two on her own home and one on a rental property), and the insurance company decided the risk of future claims called for much higher premiums.

“Unfortunately, I had to tell her that none of the companies I work with would take her on as a client,” he says.

Texas is caught up in a rising home insurance crisis that has struck other Gulf Coast states, most notably Florida and Louisiana. The complexities in Texas are different than in the other Gulf states. Still, the end results are the same – soaring homeowners insurance premiums and some insurance carriers deciding the state is just too risky to continue doing business there.

  • Extreme weather is causing more property damage, resulting in a rocketing number of insurance claims in Texas.
  • Texas had more major hail events in 2022 than any other state, and the cost of repairing that damage is also going up.
  • Inflation and continued supply chain issues are causing the overall average cost of a claim to increase across the state.

What is causing Texas home insurance rates to rise?

Like Florida and Louisiana, extreme weather is key to Texas’ mounting property insurance troubles. However, each state has its own complexities, and Texas is no different.

Louisiana’s primary culprit is its vulnerability to hurricanes and flooding. Florida also faces the intense wrath that hurricanes can bring, but insurers say mounting litigation costs are a more significant factor. In a report on the Florida home insurance crisis, the Insurance Information Institute notes that Florida was responsible for about 80% of all homeowners insurance lawsuits nationwide.

Texas is a slightly different scenario. It does face the wrath of hurricanes along its Gulf Coast, but the impacts of severe hailstorms in the state have been even more damaging, particularly in the populous and fast-growing areas around Dallas-Fort Worth.

In 2022, Texas recorded 458 major hail events, the most of any state in the U.S., according to the U.S. Department of Commerce Storm Prediction Center and the National Weather Service. That’s compared to 399 events in Nebraska, the next most hail-affected state.

State Farm alone paid out $510 million in hail damage claims in Texas in 2022. The number of hail damage claims made by State Farm customers across the country in 2022 increased by nearly 45,000 from 2021. Most of those claims fell in a band stretching down the country's middle from Minnesota to Texas.

Not only had the number of hail claims soared, but the cost of those claims increased dramatically.

“Inflation and supply chain issues occurring across the country [are] also responsible for the overall increase,” State Farm said in a report issued in March. “To put it in more relative terms, the average claim increased by nearly $2,000 last year. That is the largest year-over-year increase to date.”

The simple result is that home insurance costs in Texas are rising steeply, and policyholders could be in for a shock at renewal time.

What is the result of mounting Texas hail claims and costs?

Rising costs are prompting insurers to get out of the Texas market or limit their business there, while some are just going into default.

In 2022, two Florida property and casualty insurance companies, Weston and Fed Nat, were ordered to end operations by Florida state officials. That had spillover effects in Texas, where the companies also did business. Weston had about 23,000 policyholders in Texas, and FedNat had about 1,000.

The Texas Department of Insurance issued an emergency order that gave affected homeowners an extension to apply for coverage with the Texas Windstorm Insurance Association (TWIA), the state’s insurer of last resort. TWIA provides wind and hail insurance for property owners in designated catastrophe areas along the Texas Gulf Coast.

The increased number of homeowners seeking refuge with TWIA resulted in a massive spike in its financial exposure in 2022, jumping almost 30% to $78 billion. Yet, as its financial exposure soared, its reserves to pay claims remained almost flat. The result? It doesn’t have enough money to cover claims if another Hurricane Ike-like event hits the state. Ike, which hit the coast in 2008, caused about $19.3 billion in damages.

The association considered an option that would have required insurance companies in Texas to buy a $700 million reinsurance policy for TWIA, which would have raised its claims-paying capacity to about $5.2 billion.

However, on April 19, 2023, the TWIA board of directors held a meeting and decided not to pursue the option. The TWIA’s total funding for the 2023 storm season is $4.5 billion.

What can Texas homeowners do to save on insurance?

Home insurance rates in Texas are soaring, so what’s a homeowner to do other than just keep paying higher premiums?

Start by ensuring you are already getting the best deal on your insurance. Have you taken advantage of any discounts that may be available, such as bundling policies for home, auto, boat or RV?

Next, see if you belong to an organization that may partner with an insurance carrier. Many companies have organized partnerships with carriers for discounted rates on insurance. Also, consider college alumni discounts or deals offered to trade or professional groups such as doctors, nurses, lawyers, accountants and engineers.

Get some competing quotes. Don’t take it for granted that your current insurance carrier is giving you the best deal. Carriers look at risk profiles differently, and while you may be considered higher risk with one, you may not be with another.

Wadley says he now recommends clients shop for rates yearly. He used to recommend it every three years, but the market is changing so quickly that it can now make a big difference.

He also says to think carefully about filing a claim. If the repair cost is only a little more than your deductible, it might benefit you in the long run to pay for the repair yourself. Your rates are less likely to jump.

In the end, it may all come down to luck. You might be able to afford a repair for minor hail damage but not a significant pummeling of your home.

“Last year, I had a client who had a chunk of hail the size of cantaloupe hit their roof. A cantaloupe!” he says. “Most people won’t see tennis ball or even golf ball-sized hail, but who expects to see a chunk of hail that big.”

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