"Howdy Folks! I'm Big Tex! And welcome to the great state fair of Texas."
It is currently state fair time in Texas and there are changes happening in the insurance marketplace faster than you can get a Fletcher's Corny Dog. We have been handling policy renewals and home insurance companies are altering the policy terms, which is impacting how your home policy responds to claims. The biggest change to note is the wind hail deductible terms.
Understanding what happens with your homeowners policy when the next time you have storm damage has become more important than ever. Claim payments seem to be dwindling and deductible amounts seem to be climbing which are making the out of pocket expenses climb even for Big Tex or the folks that own Fletchers. Since you may have more questions than answers if you are not an insurance agent, let's take a look at what is going on with your minimum deductible for a covered claims from a severe storm.
What Is A Wind-Hail Deductible
A wind hail deductible is how much money that your homeowners insurance company expects you to pay out of your pocket before they will cover the rest of the cost of a claim caused by hail losses. Most home insurance policies sold in the state of Texas have separate deductibles for wind and hail and then everything else. That means if you have a hail claim on your roof, you would need to pay this deductible before receiving coverage from the insurance company.
It is important to note that it does not address whether or not you have replacement cost coverage on your roof. But that is a discussion for an additional article on another day.
However, Texas homeowners have consistently neglected to pay their deductibles for roof replacements through the years. This has resulted in increased claim costs and higher insurance premiums for everyone. With the spike in annual premiums and the losses mounting, the insurance companies are now taking more aggressive action to curb this activity of deductible forgiveness by roofing contractors.
Fifteen years ago the homeowners insurance providers moved from a flat deductible of $1,000 to a percentage deductible of 1% of the dwelling value for wind and hail deductibles. But that didn't stop the practice of forgiving these types of deductibles, so there was legislation that was passed back in 2019 to require people to pay deductibles. This appears to have not had the intended effect either, so the next step is to take more drastic measures with respect to your homeowners deductible.
So What's Going On With Deductibles In Texas
They're changing your standard deductible from 1% or 1.5% to up to 2% or even 3% on upcoming renewals. But here's the thing, many homeowners don't understand what that percentage is based on. It's not the cost to replace your roof, oh no. It's actually a percentage of the reconstruction value of your entire house! Otherwise known as the dwelling coverage. Yeah, that's right, the coverage for your actual dwelling.
So, let's say it costs $400,000 to rebuild your home. If you have a 1% deductible, that's $4,000. Double it for a 2% deductible and you're looking at $8,000. And if you go all the way up to a 3% deductible, that's a whopping $12,000 coming out of your pocket for a hail damage insurance claim on your roof!
Replacing a roof on a $400,000 house can cost between $15,000 and $25,000. If your responsibility is three percent of the house value, you would have to pay $12,000 out of the total cost. This is a significant amount of money that you risk losing if you're not paying attention.
Many insurance carriers in North Texas are adopting a mandatory two percent policy. I expect this to be implemented by all homeowners insurance companies by the end of the year. This change will result in the financial responsibility being doubled from $4,000 to $8,000. The decision to implement this policy was made as roofers had been finding ways to avoid charging the $4,000 fee using different methods. The intent of this change is to prevent them from doing so.
Your roofer might help you skip on a portion of that deductible. They might even write off half of it. But it is impossible for them to cover 50% of a $15,000 roof replacement and still make a profit. This is the reason why companies have implemented this practice.
Total Cost At Risk With New Homeowners Insurance Deductibles
Let's consider the financial risk involved because we are all aware of the frequency of hail storms in North Texas. Check your renewal for any changes in the wind hail deductible. Many companies in North Texas have already increased it from 1% to 1.5%. And many, if not all are going up to 2%! But if it goes up to 3%, you better hold on to your wallet because that means a lot more money will be at stake if your roof needs to be replaced.
However, there are still solutions available today that offer a 1% deductible on homeowners insurance policies. But they are disappearing fast. Given the changes that are happening with homeowners insurance deductibles, you may want consider the higher deductible to get more favorable premium terms if you are willing to accept a 2% rate.
Insurance for Texans offers True Texas Home Insurance, which guarantees the lowest wind and hail deductible and replacement costs for your roof when you purchase a policy from us. We can discuss the possibility of increasing it if it aligns with your economic and financial circumstances. But this is part of our commitment to providing a True Texas Home Insurance guarantee!
The 3% minimum windstorm deductible implies that you may have to cover most of the cost for a roof replacement in the event of a major storm after your policy is renewed. Don't get stuck wondering what happened after a hail claim. As a local, independent insurance agency we work for you, the Texas homeowner, rather than some big insurance company!
Contact us at 469.789.0220 or hit that button below for a review of your insurance coverage to ensure you have True Texas Home Insurance.