With all of the chaos that Texas homeowners are experiencing with respect to their insurance, it can be easy to become confused about some of the terms, what they mean, and how they apply to claims. Since we are now squarely in the middle of the spring hail season one really hot topic for homeowners like Amanda is understanding what a hail deductible is and how it works. Amanda is a customer who called after the last big storm rolled through Roanoke, Lantant, Corinth and on up to the Red River. Her roof had been smacked pretty hard by the large hail that fell that night.
Amanda had a roofer come and inspect the damage a couple of days after the storm. They had established that there was enough damage to go ahead and file the claim for the replacement of the roof. As she was filing the claim with her home insurance company, the friendly voice on the other end of the phone told her that the deductible on the claim was going to be $7,250. She didn't really know where that number came from or what she was supposed to do with it. That's when she called our office to get some help. What is a wind-hail deductible and what do I do with it on my home insurance policy?
Each Texas home insurance policy has many provisions included in it to define the coverage that you have with that insurance company. One key section in each policy that is devoted to deductibles. An insurance deductible is the amount of money that your insurance carriers expect you to pay before they make your whole in a covered claim. Amanda now understood that the $7,250 amount that she heard meant that she was going to pay out of pocket for her new roof. But let's dig a little deeper on Texas Home Insurance policies. Because you likely have more than one deductible and you can have as many as three different deductibles with some insurance companies. How in the world can you have three different deductibles?
Most standard home insurance policies in Texas have at least two different types of deductibles. They will have a Wind & Hail Deductible, which is what Amanda is currently focused on, when those common, pesky storms pop up during the spring or fall. Along with that, you will see an "All Other Perils" deductible for everything else that isn't storm related. The other type of deductible that you will see is a stand alone Tropical Storm (Hurricane) deductible.
The Wind and Hail deductible is applicable when damage to your home comes from a storm that has either high winds or hail damage. Or even both! It typically applies to your roof, but can also impact other places on your home or property like windows, fences, gutters, and siding. Since hail storms have become the single most frequent claim in Texas, the home insurance companies have separated this line item out in an attempt to control claim costs. Amanda was learning this the hard way.
In an attempt to contain claim costs from hail coverage, home insurance companies have begun to put different parameters in place to make it more difficult for Texas homeowners to complete a claim without paying the deductible. These changes to the deductible have moved them from being a small, flat dollar amount like $500 or a $1,000 deductible option to what is known as a percentage deductible with all insurance providers. The percentage deductible is calculated as a percentage of your dwelling amount on your policy which is located on your declaration page. This was the part that Amanda did not understand before our conversation. We explained that the $7,250 deductible was really 2% of her home reconstruction value of $362,500.
Many Texas Home Insurance policies have increased their mandatory minimum wind hail deductible at 2% of that dwelling amount. It has been a move to combat the practice of waiving deductibles by contractors. This is a change for most homeowners over the last 12 months, which is what caught Amanda off guard. It's also important to note that in coastal areas, the hurricane deductibles have in some cases moved even higher than 2% of the dwelling value for those insurance claims.
These changes are primarily because roofing contractors will inflate your hail claim amount knowing that the insurance companies will approve the requested work. After getting approval at the inflated insurance coverage amount, they then simply would not complete all of the approved work as described in the hail loss. The money buffer between what was approved under the hail coverage and the work and materials that was actually performed allows the homeowner to suffer no out of pocket expenses while the roofing company can still maintain their profit margin. The practice became so commonplace that even the Texas Legislature enacted a new law during the 2019 session prohibiting the waiving of deductibles. This move was pushed by the insurance industry in an attempt to keep the premiums from homeowners insurance policies from continuing to skyrocket. It hasn't seemed to work well at all as property insurance premiums have continued to rise through 2023.
Obviously, the new legislation has not worked out very well in keeping those premiums in check. Amanda knew that her premiums had gone up, but didn't realize how these changes affect how claims from hail events are handled and processed. Many companies are keeping a much tighter cost control on the claim expenses associated with hail coverage in an attempt to keep windstorm deductibles and premiums reasonable. Please have some understanding that asking for documentation on proof of completed work is simply the insurance company doing their job while keeping contractors honest. This will help keep property owners' costs down in the long run where wind damage is concerned. While Amanda wasn't excited about the changes, she realized that it will help keep her premiums in check long term.
Beyond that, Amanda was thankful that she works with our agents at Insurance For Texans. Our goal is to make sure that when you are shopping for a home insurance policy you understand what TRUE Texas Home Insurance provides to you. Our promise to property owners in Texas is two fold on your home insurance policy where wind damage is concerned. We make sure that your windstorm deductible is the lowest possible amount for the geography that you live in. Since that percentage deductible can vary between Houston, Austin, Ft Worth, and Amarillo, we simply commit to keeping the deductible amount as low as possible. The second part of the promise is to make sure that your claim will be settled as replacement cost rather than actual cash value. Many Texans are finding that their great wind damage deductible is not as good as they thought when the depreciation factor of the "roof payment schedule" is applied after the weather event happens.
Working with an experienced independent insurance agent can help you navigate the waters of differing deductibles and claim settlements. Insurance For Texans has highly trained professionals that can point out the differences for you as well as provide guidance to companies that can match your needs to the pricing that you are looking for since we are independent insurance agents. Just click the button below to get get started on your path to understanding your home insurance policy fully.