Jim is buying his first home on the west side of Fort Worth. He’s excited, a little nervous, and trying to get everything in order before closing day. The journey to find this home has been a journey! One of the things on his list is getting his home insurance policy. He reaches out to three insurance agents for quotes, thinking it will be simple to knock this item off his list.
But when the quotes come back, confusion set in for Jim. The three different agents each had different amounts for the deductible. The first one has a $1,500 flat deductible for something called "all other perils". The second says 3% for hail coverage and 1% for everything else. The third shows 2% deductible amounts for everything. Jim knew he would have options on his homeowners policy, but this was overwhelming. He wasn't completely sure what it all meant, and certainly not sure which one is better.
He began to wonder what the normal amount is for a standard homeowners insurance policy. If you’re like Jim and trying to figure out what your deductible should be, here’s what Jim found out.
A deductible is the amount you agree to pay out of your own pocket before your insurance company pays the rest of the claim. That’s simple enough to understand for most Texans, whether you are a first time homebuyer like Jim or a long time owner.
In Texas most policy deductibles for wind and hail storms are not flat amounts like $1,000 or $2,000. Instead, they’re a percentage of your home’s insured value. This is because the hail damage, which happens often across the state, has become so pervasive that the insurance providers have had to shift more of the cost of risk to the homeowner.
For covered claims that are not wind and hail damage, there is often a separate deductible that will be applied to those claim payments. This is known as an all other perils insurance claims. These claim settlements can have a flat dollar deductible or percentage deductible depending upon the company.
So now Jim has to understand not just what the deductible is, but how it’s calculated. That’s where things start to get more complicated.
Even though percentage deductibles have been common across Texas for many years now, homeowners often don't understand how they work. Rather than being a percentage of the cost of repairs, they are based on the dwelling value of your home insurance coverage.
The dwelling value is the estimated replacement cost to rebuild your entire home in the event of a total loss. If Jim’s home is insured for $350,000 and he has minimum deductible of 2%, he will need to pay $7,000 before his insurance pays anything on a hail damage claim. Given his roof replacement cost would be approximately $20,000, that amount felt high to him.
This increase to hail insurance deductibles in storm prone areas has caught a lot of people off guard. Jim was beginning to realize that even though one of those three quotes had significantly lower insurance premiums, it would cost him much more out of pocket when a storm hits.
Remember the "all other perils" deductible that Jim noticed? It was beginning to make a bit more sense to him. Many Texans think that a standard deductible is having the same amount for every single claim. But that is not true and it can save you money if you plan well.
Hail claims have the highest frequency of claim in Texas. That means those types of deductibles will have the highest minimum amounts. But for non-storm damage, you can typically have a much lower deductible options available to you. Lowering these options will not have a large effect on your cost of premiums.
This means Jim's homeowners deductible if his house catches fire can be much smaller during a catastrophic time. Not only is he saving money if disaster strikes, but it is also not raising his homeowners insurance premiums very much. That’s why it’s important to look closely at how each type of damage is handled in the policy.
Jim lives in Fort Worth, where hailstorms are a regular part of life. His agent tells him that in the DFW area, 2% is now the starting point for wind and hail deductibles. Some companies might even go higher. But that isn't necessarily true for all of Texas.
If Jim had been buying a home along the coast or in Houston, he’d likely be looking at a 3% or higher deductible. That’s because of hurricane risk. Along with that, it is common to see a separate, special deductible just for named storms in this region as well.
Other parts of Texas may still see 1% or 2% depending on the area and the company. So when Jim sees that 2% number in his quote, he now understands that it’s not unusual. It’s just part of how insurance works in places that get hit by big storms.
Jim’s first instinct was to go with the cheapest monthly premium. That quote had the highest homeowners insurance deductible. It seemed like a good deal until he started doing the math.
Yes, a higher deductible lowers the cost of the policy. But if Jim ever has to use it, he’ll have to come up with thousands of dollars in out of pocket expenses before his coverage even kicks in. That could put him in a tough spot if a storm hits right after closing.
He starts thinking less about what saves money today and more about what happens if something goes wrong tomorrow. That’s when he decides to talk to someone who can really explain the options.
Jim reached out to Insurance For Texans. They aren’t tied to just one insurance company like some others. Instead, they compare multiple policies and help Jim find the one that makes the most sense for his new home through True Texas Home Insurance.
The independent insurance agent explain the difference between the different percentage deductibles available. They talk through wind and hail risks in his area and how roof payment schedules affect his coverage as well. We helped him figure out what kind of coverage actually protects him instead of just looking cheap.
Jim was glad to learn about True Texas Home Insurance. It’s built specifically for homes in this state and offers real protection against the kinds of weather Texas homeowners deal with every year.
Jim went from confused and overwhelmed to feeling confident about his coverage. You can do the same. Click the button below to talk with an independent agent who understands Texas insurance and can help you build a policy that actually works when it’s time to file a claim.