Texas Homeowner Insurance Claims Were Closed Without Any Payment
According to a recent study that was reported on in the Houston Chronicle, almost half of all Texas homeowner insurance claims were closed without any payment to the homeowner.
A company called Weiss Ratings was in charge of the study and they found that 47% of claims filed by Texas homeowners have been closed by insurers without any payment to the homeowner.
While insurers closing claims without a payment on a portion of the claim is not uncommon, the rates of the entire claim being dismissed are unheard of according to Martin Weiss, the agency’s founder. “50%? No, that’s never been the case,” he said in the Houston Chronicle story.
As weather events become more extreme and common, insurance companies nationwide have scaled back coverage and changed the structure of the deductible, particularly for homeowners insurance. In states where severe weather is common, many insurance companies have moved to a percentage deductible for hail and wind damage which can dramatically increase a homeowners out of pocket costs.
A percentage deductible requires the homeowner to pay a percentage of their total homeowners coverage level as a deductible for certain types of damage, typically hail and wind but insurers may start to make percentage deductibles standard for all types of damage.
As an example, if you are carrying $400,000 of coverage on your home and have a 3% deductible, you will need to pay $12,000 as a deductible if you home is severely damaged or destroyed. This type of expense can often be difficult to impossible for a homeowner to cover, leaving the insurance company to close the claim without payment, leaving the homeowner with a damaged home and no recourse for repairs.
According to insurance industry reps quoted in the Houston Chronicle story, the reason so many claims have gone unpaid is because the homeowners deductible exceeded the cost of the repairs meaning the homeowner is responsible for the entire cost of the repair.
Texas is not the only state where insurers are raising deductibles, states such as California, Florida and others where severe weather is common are also making the move to higher deductibles, leaving homeowners on the hook for the cost of repairs.
As climate change results in more severe weather events, insurance experts expect more weather disasters and higher insurance rates and deductibles going forward.
A recent article in the Guardian highlighted new NASA data showing that extreme weather events have grown dramatically over the past five years which will only increase the number of claims and eventually raise deductibles and premiums for all policyholders as insurers have to pass along the costs of claims.