One of the sayings I heard after moving to Dallas was, “If you’re tired of the weather in Texas, just wait a few hours and it will change.” That may not be entirely accurate, but our weather does tend to be filled with surprises. 2017 held a couple of major surprises for Texans and its effect on home and car insurance will be felt this year. Let’s look at what happened and how it will impact home insurance this year.
Hail: Everything’s bigger in Texas including our hail! North Texas experienced a couple of major hail storms last year with golf ball to baseball sized hail. The two storms followed a similar track from Justin eastward toward Sachse damaging homes and vehicles. Home and car insurance claims combined were in the hundreds of millions and this followed a similar weather pattern from 2016.
The impact of these storms showed up almost immediately and continues to be felt even now. The impact of these storms will impact north Texas homeowners in four different ways:
- Rates – I expect home insurance rates in the areas hit hardest by the hail to climb 20% to 30% with the surrounding areas to jump in the 15% to 20% range. I began to see this pattern with clients’ renewals in the 4th quarter and believe it will continue well into this year.
- Coverage – A couple of insurance companies, one large one and some smaller ones, changed their policies from replacement cost coverage on roofs to actual cash value meaning claims will be paid on a depreciated basis. This isn’t a good move for homeowners and we’re actively working with clients to confirm are covered on a replacement cost basis (see https://wiseinsurancegroup.com/home-insurance-replacement-cost-actual-cash-value/). I’m unsure if this move will gain any traction, but believe many companies may offer it as an option.
- Deductibles – Most home insurance companies still offer a wind / hail deductible of 1% of your home’s insured value. A couple of smaller home insurance companies raised this deductible from 1% to 1.5% or 2%. I expect this trend to expand as insurance companies seek to mitigate their losses.
- Roof Age – Your roof’s age may impact your ability to get home insurance or change companies when searching for a lower rate. A few companies will not write a policy on a home whose roof is over 15 years old. Others automatically either raise the wind / hail deductible from 1% to 2% and a few move the coverage from replacement cost to actual cash value coverage. Your roof’s age has a profound impact on what you pay for home insurance and I believe these practices will grow in the year to come.
Hurricane Harvey: The Texas coast scored a direct hit during the 2017 hurricane season with Hurricane Harvey. Wind and storm surge walloped coastal communities from Rockport to Beaumont, and Houston suffered a TKO with up to almost 60 inches of rain fall. The flooding Houston experienced was some of the worst in its history. Total damages were originally estimated to be $120 million to over a billion and I don’t expect we will know the final tally until sometime later this year. I’m also curious what the breakout of flood claims (storm surge and rising water) versus wind claims will end up being, however, I expect flood claims to dominate total losses from Harvey. I expect Harvey to impact home insurance along the coast in a couple of areas:
- Rates – I believe home insurance rates to rise somewhere around 20%, plus or minus for those areas hardest hit by Harvey’s winds. Those hit hardest by flood should see lower increases in the 15% range.
- Wind Deductible – After Hurricanes Rita and Ike, wind deductibles in coastal communities jumped from 1% to as much as 5% among some carriers. 2% is what most home insurance companies are currently writing, but I would not be surprised if a few raised the minimum deductible higher.
- Flood – The US Congress has been mulling what to do with Flood insurance ever since Super Storm Sandy. Some propose limiting rebuilding in areas closest to the water, others want homes to be rebuilt or raised above the flood zone and others want to raise rates for those in the most frequently impacted areas. I don’t expect any changes this year, but do expect the flood insurance program will be overhauled at some point with one or more of these recommendations being enacted.
What do you think will happen? Share your thoughts concerns, and questions with me on my Facebook, Google + and LinkedIn pages. I’d love to hear from you!
P.S. I’ll blog about the impact of our weather on car insurance on Thursday!