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You know the story of the canary in the coal mine? Miners took caged canaries into the mines, and when the odorless carbon monoxide killed the birds, it was time for the miners to flee.
Canary in the coal mine has come to mean the issuance of a first warning about something before anyone knows about it.
In this story, Jay Calvert of Frisco is the canary. He is the first to alert The Watchdog that his insurance company, Farmers Insurance Group, is raising the minimum deductible on wind and hail damage from 1% to 1.5%. He wonders if this is a trend.
A half a point increase on a deductible may not sound like much, but to every homeowner looking to replace a roof after a hailstorm, it’s a big deal. Sometimes you must pay the deductible out of your pocket before an insurance company will pay the rest for the replacement or repair.
A deductible is based on a percentage of a dwelling amount’s actual coverage at the time of the loss. If your house is covered at $400,000, a 1% deductible is $4,000. But at 1.5%, it grows to $6,000.
I’m not sure what your financial situation is, but after paying my property tax, I don’t have a few thousand dollars extra to pay for a new roof that my insurance company is supposed to handle.
Generally, the higher the deductible, the lower the premiums are for the rest of a policy.
In Texas, wind/hail deductibles are kept separate from “all other perils” insurance. So you might have to choose deductible amounts for each of them.
First, let’s hear Jay’s story, then learn if it’s true. Then we’ll share some ideas to help you save.
‘Bleeding edge’ of a trend?
This Watchdog inquiry began because Jay’s son-in-law noticed an increase on his renewal for Farmers homeowners. Son-in-law called his Farmers agent and was told the increase applies to the Dallas-Fort Worth region.
To verify, Jay called his Farmers agent. He heard the same. “They actually told me this had to be done to remain profitable due to all the hail claims from the past year,” he recalls.
I don’t want to leave you with the impression that nobody else has raised their rates. Deductibles can range from 1% to 5% based on the company.
The Texas Department of Insurance gives approval to requests to raise insurance premiums but not on deductibles.
Ware V. Wendell of Texas Watch, an Austin-based group that promotes consumer interests in insurance matters, told me this find by Jay is on the “bleeding edge” of a potential trend. He worries the increases will spread across the industry.
Deductibles as high as 5%
I talked to top people in the insurance industry, but first I want to share what Farmers Insurance spokesperson Luis Sahagun told me after I sent him Jay’s letter.
The minimum for hail and wind deductibles “will be adjusted,” he confirmed, because of “the increasing cost of claims related to hail and wind in the Dallas/Fort Worth area.” The change took effect in July.
“We feel this adjustment is in alignment with market conditions and will help us remain competitive,” he added.
What do others say?
David Bolduc, acting public counsel who represents consumers before the state insurance department, says other factors, such as inflation, supply chain issues and increases in materials costs, are likely part of this, too.
Gardner Selby, a senior researcher with the state insurance department, says if a company increases a deductible at renewal, the company must give at least 30 days’ notice to policyholders.
The notice must be written in “plain language” and placed on the first page.
Richard Johnson of the Insurance Council of Texas told me, “Some companies may be making changes to look for ways to control future losses.” He said there have been no recent major hailstorms in the area.
According to stormsite.com, the Dallas area was hit with three hail storms this year, six last year, one in 2020 and five in 2019.
State Farm spokesman Chris Pilcic says that 1% is the lowest possible deductible. Customers can choose a deductible as high as 5%.
Wendell of Texas Watch says the Texas Department of Insurance must push back against increases and make companies lower their premiums if they raise their deductibles.
Tips on deductibles
The state offers the www.helpinsure.com website. The state insurance department keeps records of a company’s ratings, complaints and licensing.
Consumer Reports suggests that, before filing a claim larger than your deductible, ask your insurance agent how much your premium would go up and for how many years. “If the claim payout is higher than the annual surcharge times the number of years it would be in effect, then it might make financial sense to file a claim,” Consumer Reports has stated.
One deductible covers one incident. If you have two claims, you’ll have to pay twice.
Jay says, if you believe you need a new roof, get it before your current policy expires.
The most important tip is to shop around for a better price with more, not less, insurance coverage.