Mary is a single mom living in Waco. Like so many parents right now, she is watching every penny that leaves her bank account. Groceries have gone up. Gas prices have gone up. Her kids seem to need money for something new every week. So when her mortgage payment went up a little after an escrow adjustment, Mary looked at her homeowners insurance policy as the next place to trim her budget.
She figured it would be simple. Just log in online with the homeowners insurance company, click a few buttons, lower some coverage limits, and put a little money back in her pocket each month. After all, she had not filed a claim in years. What could go wrong?
About three weeks later, a letter from her mortgage lender landed in her mailbox. It said her homeowners policy did not meet the loan requirements anymore. If she did not fix it fast, the mortgage lender would buy a more expensive force-placed policy for her and add it to her monthly payment. The small savings she thought she locked in would be wiped out overnight.
Mary’s story is a lesson for ever good Texan. People are trying to do the smart thing for their families in the face of skyrocketing homeowners insurance premiums while not realizing the loss of financial protection that occurs. Let’s look at the three money-saving moves that backfire most often for Texas homeowners.
One of the first things Mary did when she looked at her online policy options was bump up her wind and hail deductible level. She moved it from one percent to five percent.
On paper, this lowered her annual premium by a few hundred dollars a year. In her mind, this was free money back in her pocket. But she did not know what that really meant for her if a storm damaged her roof.
In Texas, a wind and hail deductible is usually a percentage of the total amount your home is insured for. Mary’s home was insured for 300,000 dollars. So a one percent deductible was $3,000 out of pocket before her insurance company paid a dime. When she pushed it to five percent, her new deductible jumped to $15,000. That’s fifteen thousand dollars she would have to come up with if a big hailstorm ripped up her shingles or damaged her roof deck.
Mortgage servicers and lenders spot this change right away. Lenders have to protect their investment. They know that if a deductible is too high, a homeowner may not be able to afford repairs. That can hurt the value of the home and the bank’s security for the loan. This is why most lenders in hail-prone areas have a limit on how high that deductible can go.
Mary learned this lesson the hard way. What felt like a safe way to save a few bucks actually risked a big repair bill she could not afford and broke her loan rule about a maximum deductible amount.
The second change Mary made was changing from Replacement Cost for roof replacement. She read somewhere that Actual Cash Value might lower her insurance costs. It did. But it also changed how her policy would pay for roof repairs after a storm causes damage from wind or hail.
Replacement Cost means your policy pays what it costs to fix or replace your roof today with new materials. An Actual Cash Value basis means the insurance company subtracts for age and wear. If your roof is ten years old, they might pay you less than half of what it costs to replace it with a new one.
Mary’s roof was nine years old. If a storm hit tomorrow and caused $20,000 in damage, her insurance would pay maybe half of that. She would have to find the rest herself.
This is another thing mortgage companies care about. They want the home fully repaired after a claim so that the value is protected. Dropping Replacement Cost coverage on the roof means more risk that repairs won’t get done right or at all. As standard home insurance policies have changed claim settlement terms, the mortgage loans have changed with those times too. Many of them are now requiring replacement cost type of coverage on roofs.
The last change Mary made seemed harmless. She lowered the dwelling coverage limit. She thought, my house is worth about $300,000, but maybe I can get by with a policy that covers $250,000. It trimmed her homeowners insurance premium down just a bit more. She thought she was being clever and saving potential costs.
But this move caused the biggest problem of all.
Your mortgage company requires that your home is insured at least for the cost to fully rebuild your house. This can be more than what the house would sell for. By lowering her dwelling limit below her the amount it would take to rebuild her home, Mary violated her loan agreement.
If her house burned down tomorrow, there would not be enough money from the insurance company to pay rebuild her family’s home. That is a risk the lender will not take. So they gave her a short window to fix it or they would buy their own coverage called a force-placed insurance policy.
Mary felt sick when she realized this and what the actual cost was projected to be. All that effort to save a few dollars ended up putting her family and her home at risk.
Mary picked up the phone and called Insurance For Texans. She needed someone local who could talk her through what her homeowners insurance policy really needed to have. She wanted to protect her house and stay within her budget, but not break her loan rules again.
One of our independent agents showed her where to adjust safely and where not to cut corners. They explained exactly what her deductible meant in dollars, what replacement cost really does for her roof, and how dwelling limits are calculated the right way.
In the end, Mary got the protection she needed without surprises in the mail. She did not have to worry about force-placed insurance or getting stuck with a roof she could not afford to fix. That is why we created True Texas Home Insurance.
Saving money is smart. Protecting your home is smarter. Doing both takes someone who knows how Texas home insurance really works and how mortgage companies think.
True Texas Home Insurance, available only through Insurance For Texans, is built to protect homes like Mary’s and families like yours. It does not cut corners where it counts but also does not stuff in coverage you do not need. We do it the right way for real Texas families.
If you want to find the right coverage before you make changes that could backfire, we are here for you.
Click the button below to talk with an independent agent who works for you, not the insurance companies, and get peace of mind before the next storm hits your roof.