If you are anything like Mary, you have seen your home insurance rates climb like they are almost to the top of Kilimanjaro. Mary lives in a nice house in Dallas, and loves her neighborhood. She noticed that her escrow had reset for the year recently and that she had a jump in monthly payment. She was smart enough to know that it was either her property taxes or insurance policy going up in cost. Or maybe even both!
After the last few years of homeowners insurance premiums going up substantially, she couldn't believe that it was possible again. She remembered the unopened letter that came in the mail a few weeks back. It was about her home insurance. When she opened it, her eyes got big.Her insurance had gone up again. By a lot! Yes, another 20 percent!
Obviously, Mary was not happy. She remembered hearing on TV that the big insurance carriers were making a lot of money. The news story reported record profits. So why was her bill going up? Nothing in the insurance industry makes sense to her. She wanted to know what was going on.
Record breaking profits and raising the cost of homeowners insurance for everyday Texans doesn't sound right. And it is not, but let's also make sure we have a grasp on it.
Think about a bucket that you use to transport water in for your animals. We often fill the bucket about three quarters full when carrying it because we don't want to spill water everywhere and honestly, that full bucket is darn heavy.
But if we buy a bigger bucket and still fill it to about three quarters full, is the new bucket going to weight the same or be heavier? That seems like a simple answer to a question if you have lived here in Texas for very long at all.
Let's apply this idea to homeowners insurance premiums. The average homeowners insurance company's profits are usually in the 10% to 15% range. By law, if the percentage they make is too large for a year some of the money has be returned to you. They are filling their bucket about 15% full.
The cost of all insurance coverage has increased whether you live in Texas or Wisconsin. All of those rate increases has made the cost of homeowners insurance and others significantly higher than it used to be. They bought a bigger bucket.
So when we see the "record profits", it is about the big numbers rather than their profit margin. The bigger bucket just made the insurance industry profits "heavier" in 2024.
Healthy profits sound good for the entire insurance market, right? On the surface it is, but the giant market is a little more complicated when you look at the individual parts.
Think of the profits of the national market for insurance like a giant piggy bank. You can put money into the piggy bank from lots of different things. Most Texans think of home and auto insurance, but there are also things like life and commercial insurance. And that money doesn't just come from Texas, it comes from all over the country.
So, even if the whole piggy bank has a lot of money, the part for Texas homeowners insurance rates might not have as much. It's like saying the whole school had a great bake sale, but maybe the fifth-grade cookies didn't sell very well. So, even if the company made a lot of money overall, the profits from Texas homeowners premiums might be a different story. This makes you think about what makes Texas so different. Mary needed to know!
Texas has a special relationship with the weather. Natural disasters just seem to find their way to our great state!
We get big hailstorms, strong winds, wildfires, hurricanes, and even freezing weather that can break pipes. Remember when it iced over really bad? Lots of pipes burst!
When things like that happen, insurance companies have to pay a lot of money to fix people's homes. Also, the stuff you need to fix houses, like wood and paint, costs more money now. And heaven forbid you think about the total replacement cost of your home.
So, when one of those severe storms rolls through a house gets damaged, it costs more for the insurance company to pay for the repairs or replacement. Because these bad weather events and higher costs happen a lot in Texas, it can make insuring homes here more expensive than in other places.
This helps explain why the piggy bank here might need help, and Mary's bill might be going up even if the company is doing well in other states. Now, let's think about why these costs might take some time to catch up with the insurance prices.
Insurance companies don't just look at what happened last year or the year before. They also try to guess what might happen in the future. They use special tools to try and figure out how likely big storms are and how much property damage they might cause in Texas over the coming months. Give our recent history, it is not hard to imagine more than a handful of severe weather events causing havoc for both you and Mary.
When they think there's a good chance of extra bad weather and expensive roof repair costs in the future, they raise prices now to help pay for those problems later. So, even if last year wasn't too bad for Mary's area, the insurance analyst might be worried about what could happen next. This makes you realize that what happened in the recent past isn't the only thing that matters when it comes to homeowners insurance costs.
So, even though the big insurance companies might be making money in other places, Texas has its own challenges that can make the cost of insurance more in Dallas and other parts of Texas. Working with an experienced independent insurance agent can not only help you fight the cost battle, but they can make sure that you have the appropriate coverage types for your family.
Mary was glad that she reached out to Insurance For Texans. The experienced insurance experts helped her look at her insurance plan to see what it covers. They also helped her consider options like raising her auto coverage deductible while adding some additional insurance options that helped her sleep at night. That's what True Texas Home Insurance is made for!
If you would like help understanding what is going on with these crazy rates for homeowners insurance, the experts at Insurance For Texans can help. Click the button below to learn what your options are for covering your Texas home!