Breaking it down
Annual home insurance rates have been steadily rising since 2012, according to the Texas Department of Insurance, which regulates the state’s insurance industry. Since 2021, rates have doubled in percentage points year over year.The average price Houston homeowners pay for home insurance is $5,165 for homes valued at $350,000—above both the Texas and national average, at $4,851 and $2,511, respectively, according to data center Market Watch. Texas has the third-highest average for home insurance, falling behind all other states except Nebraska and Oklahoma, which have averages of $4,849 and $5,839, respectively.What’s happening?
Multiple factors are influencing rising rates for Houston residents, said Jonathan Mausner, new account manager at Matt Schomburg State Farm Agency in Katy. Factors include inflation, lack of insurance competition and more weather events causing home damages.
More Houston-area homes took on weather damage in 2022-23 than in years prior, citing that during the February 2021 freeze alone the Matt Schomburg State Farm Agency office paid approximately $6 million in claims, he said.
In the first half of 2024, the Houston area has already experienced major flooding and a windstorm in May, and is expecting an active hurricane season through November. Houston was hit with Tropical Storm Beryl on July 8, which put 2.2 million residents without power and caused damages across the region.
“Add in the additional hail, wind [and] storms we have had since then and you can see how all this starts to add way up,” he said.
As the cost rises for materials and labor to repair damaged homes, homeowners are submitting higher claims to insurance agencies, leading agencies to reduce the number of homes they insure, Mausner said.
Companies are having to determine their maximum probable loss, which is ensuring they can cover the cost if all their properties were damaged and filed claims, he said.
Digging deeper
With the increase in insuring the area, many insurance companies are leaving Texas, specifically the Houston area, due to the high number of claims that are rising in price, Mausner said.
“Lack of competition creates a strain on the companies that are writing [policies], because ... you’re assuming that much more risk, instead of spreading the risk around [to] other companies,” he said.
Beyond the rising rates, some residents are having problems finding insurance coverage in the Houston area because companies are unable to insure additional properties in Harris and Fort Bend counties, Mausner said. Some companies are unable to renew existing policies as well, he said.
What else?
Established in 1995, the Texas Fair Plan Association provides home insurance for residents who are unable to secure insurance elsewhere. The association was created by the Texas Legislature to ensure no residents were left behind but does require applicants to have been denied by at least two insurance companies, according to its website.
“I always recommend this as a last resort because it does not cover as much, and there’s a lot of stipulations,” Mausner said.
Looking ahead
As the market recovers and insurance companies recoup losses, State Farm is estimating to be able to open for more customers in the next one to three years, Mausner said.
