The Bob Dylan song, The Times They Are A-Changing, has never been more appropriate than now when it comes to Texas home insurance. This is especially true with insurance companies and how they are grappling with home insurance rates, hail claims, and how to cover roofs.
Texas leads the nation in significant hail events, these are storms where the hail is 1 inch in diameter or larger, with 795. Kansas, the state which came in second, had 426 such hail events. Texas home insurance companies have paid over $2 billion in hail claims since 2012, which means changes are already underway in how insurance companies cover roofs.
Higher Deductibles: Over the past several years, most Texas home insurance policies have had at least two policy deductibles, one for wind and hail and one for all other perils, although, homeowners in our coastal counties have also had a separate hurricane deductible. In most cases, the wind and hail deductible has been 1% of the dwelling amount, so if a home is insured for $200,000, the deductible is $2,000 (see http://220.127.116.11/~wiseinsu/introduction-home-insurance/ for more on deductibles).
In 2013, a few insurance companies raised the wind / hail deductible on north Texas home insurance policies to either 1.5% or 2%. This meant if a home is insured for $200,000, then the homeowner would have a deductible of $3,000 or $4,000 instead of $2,000. I’ve had clients who’ve elected to go with the higher deductibles in order to pay less for their home insurance, and others who would rather pay more for a lower deductible with another company.
Roof Age: How old a roof is has impacted the rate a homeowner pays for home insurance for the past 10 years. Many carriers provide a discount for roofs that are 10 years old and newer, however this may have a more far reaching impact than whether or not someone gets a discount. It may actually impact the coverage either by the type of coverage on the roof or the wind and hail deductible.
All of the home policies I’ve written have been replacement cost policies. This means a claim is paid on the basis of what it costs to replace the roof or item as opposed to its depreciated value (see http://18.104.22.168/~wiseinsu/home-insurance-replacement-cost-actual-cash-value/ for more information). I’m aware of one company which is contemplating shifting to actual cash value coverage on roofs over 15 years old.
Other carriers are evaluating raising the wind and hail deductible based on the roof’s age. One carrier I work with offers a 1% deductible for roofs less 9 years old, but raises the deductible to 1.5% on roofs older than 9 years, regardless of the roof type. This applies even to hail resistant roofs such as slate, concrete and ceramic tile.
Regardless of which approach is taken, insurance companies are determining whether to shift more of the burden to replace a hail damaged roof to the homeowner or charge more for their home insurance. I believe there are several action items Texas homeowners can take.
- Confirm with your agent if there are any policy coverage or deductible changes if you have a policy renewing in the next 12 months.
- Compare rates with other companies if your coverage is changing. We are actively reviewing each client’s renewal for policy changes and savings.
- If you have the cash and the roof needs to be replaced, replace it. There’s really no such thing as a “free roof.”
- Set aside funds in savings to pay the deductible if you do experience hail damage.
- If you’re buying a home, it is imperative to find out when the roof was last replaced.
I don’t think this issue is going to change, unless the weather patterns in Texas begin to cooperate or our population growth begins to slow. What do you think insurance companies should do? Share your suggestions or questions with us on our Google + and Facebook pages. I’d love to hear from you!