You know the story of the canary in the coal mine? Miners took caged canaries to 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 giving 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 increasing the minimum deductible on wind and hail damage from 1% to 1.5%. He wonders if it’s a trend.
A half-point increase on a deductible might not seem like a lot, but for every homeowner looking to replace a roof after a hailstorm, it’s a big deal. Sometimes you have to pay the deductible out of pocket before an insurance company pays the rest for the replacement or repair.
A deductible is based on a percentage of the actual coverage of a home amount at the time of loss. If your home is covered at $400,000, a 1% deductible is $4,000. But at 1.5%, it jumps to $6,000.
I don’t know what your financial situation is, but after paying my property tax, I don’t have a few thousand extra dollars to pay for a new roof that my insurance company is supposed to pay for.
Generally, the higher the deductible, the lower the premiums for the remainder of a policy.
In Texas, wind/hail deductibles are separate from “all other perils” insurance. You may therefore have to choose deductible amounts for each of them.
First, let’s hear Jay’s story, then find out if it’s true. Next, we’ll share some ideas to help you save.
‘Bleeding edge’ of a trend?
This Watchdog investigation started because Jay’s son-in-law noticed an increase in his turnover for farm owners. His son-in-law called his Farmers agent and was told the increase applied to the Dallas-Fort Worth area.
To check, Jay called his Farmers agent. He heard the same thing. “They actually told me it had to be done to stay profitable because of all the hail claims from last year,” he recalls.
I don’t want to give you the impression that no one else has raised their rates. Deductibles can vary from 1% to 5% depending on the company.
The Texas Department of Insurance approves requests for increases in insurance premiums, but not on deductibles.
Ware V. Wendell of Texas Watch, an Austin-based group that promotes consumer interests in insurance, told me that Jay’s discovery was at the forefront of a potential trend. He fears the increases will spread to the whole industry.
Deductibles up to 5%
I’ve spoken to 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, due to “the increased cost of hail and wind claims in the Dallas/Fort Worth area.” The change took effect in July.
“We believe this adjustment is in line with market conditions and will help us stay competitive,” he added.
What are others saying?
David Bolduc, acting public counsel who represents consumers before the state insurance department, says other factors, such as inflation, supply chain issues and rising material costs, are probably part of it as well.
Gardner Selby, a senior researcher with the state Department of Insurance, says if a company increases a deductible at renewal, it must give policyholders at least 30 days notice.
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 make changes to look for ways to control future losses.” He said there haven’t been any major hailstorms in the area recently.
According to stormsite.com, the Dallas area has been hit by three hailstorms this year, six last year, one in 2020 and five in 2019.
State Farm spokesman Chris Pilcic said 1% is the lowest possible deductible. Customers can choose a deductible of up to 5%.
Texas Watch’s Wendell says the Texas Department of Insurance needs to push back on increases and force companies to lower their premiums if they raise their deductibles.
Franchise Advice
The state offers the website www.helpinsure.com. The state insurance department maintains records of a company’s ratings, complaints, and licenses.
consumer reports suggests that before filing a claim over your deductible, ask your insurance agent how much your premium would increase and for how many years. “If the claim payment is more than the annual surcharge multiplied by the number of years it would be in effect, it might make financial sense to file a claim,” consumer reports said.
A deductible covers one incident. If you have two claims, you will have to pay twice.
Jay says if you think you need a new roof, buy it before your current policy expires.
The most important tip is to shop around for a better price with more, not less, insurance coverage.
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