Home Insurance Rates Have Risen

It helps to understand the reasons, and then find ways to control the cost.

 Russell C. Janecka, CIC, LUTCF

Weather has been driving the frequency and severity of losses for insurance companies operating in Texas. Texas is a big territory and weather has been affecting it from every direction. Tornados, Hail and Wind claims occur regularly even in years with no hurricanes. The number of catastrophic events (storms causing millions in damage) have risen in the last decade, so actuaries have found it necessary to build these loss costs into homeowners' rates.

Our Globe is Warming

No matter what is causing it, global temperatures are rising, so weather patterns have been changing and the industry expects that events will continue to increase in frequency. If trends improve, then economic pressures come to bare on companies to lower their rates or they risk becoming uncompetitive. 

Non-Weather Reasons

Besides the weather, the effect of inflation on the cost of goods and labor directly affect repair costs following a claim.  When the price demanded by roofers goes up, and this gets multiplied upon hundreds or thousands of homes after a storm, the net cost to an insurance carrier is astounding.  What needs to be remembered is that an insurance company is simply a pass-through mechanism. The costs after a storm get passed along to the premium payers. Because those rates are built on the expected cost of the coming year's events and the claims it expects. 

Litigation

As if that's not enough, a disturbing trend of first party litigation has erupted in Texas. Always looking for the next pot of gold, plaintiff attorneys are pursuing the dollars that flow after storm events. The cost of a weather related claims go up by the involvement of public adjusters and attorneys promoting litigation in roof claims. The practice is unethical if not in some cases illegal. But the pursuit happens none the less.

They will approach claimants despite a settlement offer being made and payment offered in a timely manner; offering to sue the company for any reason they can come up with that more could have been paid. This troubling trend has even caused some companies to cease or withdraw from certain areas of the state where litigation ballooned at a high rate. 

Attorneys advertise, or use a representative to go knocking doors through a neighborhood after a weather event has struck, trying to sign up people even before they have called their insurance company to report a claim. If insureds would simply allow their company to undergo the claim process, they could be satisfied first hand.  And if more money is sought due to higher costs or missed items, they are allowed to make a supplementary claim and do not need to resort to litigation.  It is in a carriers best interest to offer a fair and equitable settlement up front. They just need to be afforded the opportunity to do so. 

Insurable Value for a dwelling

A few years ago, major Texas fires caused total losses to several houses in Texas. Needing to rebuild, many of these homeowners realized they were inadequately insured.  To answer this problem, most insurance companies are now utilizing dwelling construction cost evaluations that are based on the cost to REBUILD a home as opposed to the original cost to build new. This is more appropriate since repair costs are greater after a wind or fire damage occurs. There is debris removal, moving and clean up, temporary storage, preparation work  -- all occurring before the first piece of wood is nailed back. This approach of building from the top down, rather than the ground up is more appropriate as a recommended guide to how much insurance may be necessary.   

Feel free to ask us to review your home and check its valuation and insurable value to help you to ensure your have protection for your home's construction and design elements. While saving money is important, it is truly more important to be adequately insured; and ultimately, it is up to the homeowner to ensure that he or she has enough insurance.

Better Home Construction is the answer!                Preparedness, Avoidance, & Loss Reduction.

Some Saving Options:  The first item to review is the policy deductibles.  Policies in Texas now have more than one deductible; one for Hurricane, Windstorm and Hail and another for the Other Covered Perils. Both of these deductibles can be raised.  Nowadays, people tend toward having a minimum of a 1% deductible for both of these options. Some insuring companies even require a minimum deductible for a named tropical storm of 2%. Raising your deductibles correlates to a decrease in your annual premium.

Replace and update your roof.  A new rating trend in Texas is based on a discount for the roof age, and a surcharge for an older roof.  Some companies are limiting replacement cost coverage to a roof that is less than a certain age, like 17 years.  So rather than sitting around, waiting for a storm to damage your roof in order for you to replace it, you could do so and save money on your renewal. Call your agent to ask about this. The opportunity to get a new-roof discount is a good incentive to do it, and a new roof can better withstand harsh weather events; thus the reason for the discount.
 
It makes a great deal of sense and dollars to insure both the home and autos with the same insurance company. The companion policy discount is a natural savings that should be taken advantage of, and can be quite substantial. Pull out your auto policy and call or come by our office to let us give you a comparison quote. 

Look for a company that also offers a companion life insurance policy discounts, claims free discount and alarm credit discounts.  So making some wise decisions can gain you not only good coverage, but great discount rewards as well.