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Why is Home Insurance in Texas So Expensive?

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The Reasons for High Homeowner’s Coverage Rates in Texas

Insurance can be a complex topic, especially when it comes to how your rates are calculated. The situation becomes even more complicated, though, when discerning why homeowners might pay more for insurance coverage in one state than another. 

Pulling from our decades of combined experience, along with publicly available data from some of the top organizations in the industry, the team at IHS Insurance Group will outline potential reasons why home insurance in Texas is so expensive. 

Texas’s Propensity for Flooding 

According to the Flood Safety Education Project, the National Weather Service has identified Central Texas “as the most flash-flood prone area in the United States.” Expanding outside this region, more than 10 percent of the state’s total landmass—and approximately 8 million structures—are located in flood-prone areas. 

As a result, it might not be any surprise that Texas shares the lead with Florida and Louisiana as one of the states with the most flood losses, annually, is “among the top four states with repeat flood losses to the same properties,” and has more than twice the flood-related deaths as the next closest state, California. 

This could especially be a concern if you live along Texas’s Gulf Coast, which is susceptible to hurricanes between June 1 and November 30 each year. 

Granted, the peril of flood is excluded from homeowners policies. However, due to the increased risk of flooding in many areas of Texas, it’s usually a wise idea to purchase flood insurance from the federal government to help protect your assets in the event of a loss. 

Related: Facts and Myths About Flood Insurance 

Excluded or not, the fact of the matter is that the immense losses caused by frequent floods in Texas ultimately trickle down and translate into higher rates for the state’s homeowners. 

Texas Homeowners Claims for Hail Damage 

The bottom line is that Texas homeowners file more hail-related insurance claims per capita than any other state. This is mostly because, based on data pulled from the Rocky Mountain Insurance Information Association (RMIIA), the state had a total of 584 severe hail days between 2017 and 2019—250+ percent more than the national average. 

Consequently, Texans filed a total of 637,977 hail claims from 2017 through 2019, which is ultimately reflected in higher insurance premiums for the state’s homeowners. 

The Financial Impact of Natural Disasters in Texas 

Even if we zoom out from specific loss types, we can see from the data that Texan homeowners are subjected to more natural disasters that residents of other states. 

Specifically, the Insurance Research Council (IIRC) tells us that between 2008 and 2013, an “increase in catastrophe-related experiences” occurred in the state, which “accounted for approximately 53 percent of all homeowner claim payments.” This represented an increase of 22 percent compared to the previous 11 years! 

What’s more, the IIRC also points out that, according to data reported by insurance carriers between 1997 and 2013, the total amount paid per homeowners claim was higher in Texas in most years than in other states. Here are select examples: 

Year  Average Homeowners Claim Payout: Texas  Average Homeowners Claim Payout: US  Difference 
2008  $1,026  $516  +50% 
2011  $794  $625  +20% 
2013  $551  $442  +20% 

 Taken together, Texas homeowners file more claims, with higher average payouts, than residents of other states, which results in higher insurance premiums. 

Not only is the frequency of homeowners claims escalating in Texas, but also the severity of each claim. 

This “rapid increase in the severity of homeowners insurance claims has multiple causes,” the IIRC says, “including an increase in the size of complexity of new homes, the increased severity of storms, and major increases in the price of oil-based building materials such as asphalt and tar roofing.” 

Homeowners Insurance Fraud in Texas 

Fraud is a problem that negatively impacts the entire insurance industry: not just personal lines, and not only related to residents of Texas. 

The Coalition Against Insurance Fraud (CAIF) outlines this fact by reporting that “fraud accounts for 5-10 percent of claims costs for US and Canadian insurers,” with “nearly one-third of insurers (32 percent) say[ing] fraud was as high as 20 percent of claims costs.” When it comes to claims, more than percent of insurers indicate that “fraud losses cost 10-20 percent of claim volume. 

What about personal lines policies, such as homeowners, auto, and so forth? According to CAIF, “fraud comprises about 10 percent of property-casualty insurance losses and loss adjustment expenses each year,” totaling about $30 billion. 

Related to Texas homeowners insurance fraud, the crime accounted for 14.4 percent of all reports filed with the Texas Department of Insurance during 2018. It accounted for an estimated $1.5 million during that year alone. 

Like all of the other factors we’ve listed here, these costs ultimately get passed along to Texas homeowners in the form of higher insurance rates. 

Is there anything you can do to minimize what you pay for your homeowners insurance, though? 

Don’t Pay More Than Necessary for Your Homeowners Insurance in Texas 

Based on many of the factors above, Texans typically pay more for their homeowners insurance than residents of most other states. 

However, the good news is this doesn’t mean you have to pay more than you’re comfortable with to cover adequately (what’s probably) your most expensive asset. Furthermore, the professional staff at IHS Insurance Group can walk you through the process, answer any questions you might have, and help you save more of your hard-earned money wherever possible. 

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