Why do you need insurance anyway? Here are some helpful tips for explaining to your clients why home insurance benefits them. The Homebuyers Insurance Handbook, produced by the Insurance Information Institute and NAR, is a useful resource you can share with them. Your clients may need insurance as part of obtaining a mortgage. Insurance could help a homeowner rebuild, repair, or replace the home and belongings if something happened to it. Insurance can help your clients recover following a burglary or help defend them during a lawsuit. Homeowners can purchase insurance policies based on the amount of coverage they want. Do they want the cash value of what was lost? The cost to replace? Replacement plus a little more? Or whatever it takes to restore or replace the assets? The Homebuyers Insurance Handbook goes on to explain what to keep in mind when choosing how much coverage to buy. Insurance typically covers the home itself, the insured’s belongings, the property’s landscaping, no-fault medical coverage, liability protection, and additional living expenses if some event forces you to stay away from your home. It is getting more expensive—and in some cases more difficult—for your clients to get home insurance.
Insurance rates have been rising nationwide as companies try to deal with higher costs from major weather events, inflation, and reinsurance. Meanwhile, rising home values mean homeowners are paying more to insure their same property. “It’s what people call a hard market. It’s difficult to shop in,” says David Bolduc, Public Counsel of the State of Texas Office of Public Insurance Counsel. “Your options are relatively expensive and limited. You’re dealing with companies under a lot of cost pressure because payments to policyholders are up, the frequency of major events is up, and the severity of damage is up.” Most of your clients will insure their homes, either because their mortgage lender requires them to or because they want to protect what is probably their most valuable asset. These rising costs have an effect on home affordability. Issues in the insurance industry are causing difficulties and delays in some real estate transactions and can put deals at risk of not closing. You should also know that insurance options may be limited in areas at the highest risk for major weather events. In these markets, it’s important to know what resources you can share with your clients and where to find additional help. Here’s where the industry in Texas stands today, and ways you can serve your clients as they navigate this market.
Why rates rose in Texas Major storms are driving an increase in the number of home insurance claims. Including drought events, NOAA reports 16 events in 2023 and 20 events in 2024 with billion-dollar losses. The issue isn’t just the hurricanes on the coast or tornadoes in North Texas—major events are happening across Texas. And from an insurance perspective, the greater the population density, the more claims will be generated when an event happens. The companies’ exposure goes up pretty fast, Bolduc explains. The number of claims and dollars distributed is rising in hard-hit areas in part because more people are moving to these areas, he adds. Companies are not only facing more insurance claims, but higher inflation and reinsurance costs are making it more expensive to respond to them. These circumstances are going to drive up insurance rates. In 2023 alone, rates rose an average 21.1%, according to the Texas Department of Insurance. Same house, higher bill Median home prices in Texas grew about 30% from 2020 to 2024, according to MarketViewer data from Texas REALTORS®. Unfortunately, that means homeowners insurance premiums went up, as it costs more to repair or replace something more valuable. Using higher rates to insure more valuable properties is going to translate into larger bills for Texas homeowners. Home insurance has always been part of a homebuyer’s calculations, but it didn’t used to be as significant a consideration, Bolduc says. It’s easy to imagine a car buyer thinking about how much more it would cost to insure the pricier model of two options. Nowadays, the same thing is happening in home sales, he continues. Can your clients afford to insure that house if the market booms and it doubles in value? The topic is now on homebuyers’ radars.
Where do we go from here? In its 2024 Biennial Report, TDI suggested that the Texas Legislature incentivize programs related to home construction. Make homes and roofs more resilient, the logic goes, and properties can better weather major events. “More widespread use of higher building standards could result in less costly insurance claims, which would act to restrain the cost of homeowners insurance,” TDI states.
Bolduc recalls a time after a major storm when houses built by Habitat for Humanity fared much better than neighboring houses. It turned out that the Habitat houses used a particular type of roof fastener that made them more resilient. For its part, the insurance industry is intensifying its focus on predicting and preventing future damage and losses, says the Insurance Information Institute. Carriers are looking at how to spread out their risk, Bolduc says. Companies are discussing where to offer coverage so their business is not exclusively concentrated in hard-hit areas, he continues. They are also developing new insurance products. They’re looking at mitigation funds and grants, among other strategies. So far, Texas has not seen major insurance companies say they are going to completely stop writing policies, according to Bolduc. However, some carriers took steps last year to limit new policies or stop renewing policies. “Companies are deciding internally that they have too much exposure in some areas. If we have a bad storm, it’s going to cost them a fortune. So they are looking at insuring homes in other places and maybe cutting back in parts of Texas,” Bolduc says.
How can you help? Bolduc recommends discussing insurance topics early on with your clients. It gets them thinking about affordability and helps shape the home search. Talking about insurance early on also helps you. Insurance-related complications tend to happen at the end of the transaction, Bolduc notes. Something falls through and the buyer and insurer must scramble to find coverage to meet the lender’s requirements. The earlier you discuss the topic, the more likely it is that the process will go smoothly. You can also encourage your clients to hire an independent insurance agent, he says. An insurance agent may be able to help your clients find advantages your clients wouldn’t know about. Bolduc also suggests that you recommend that your clients shop policies. While some deductibles may be 1% of the value of a home, others are now much higher. Pay attention to insurer discounts. Little things add up. Carriers may offer your clients a break if preventative measures reduce the chance of a future claim. “Keeping an open dialogue with your insurance professional can enhance your efforts to protect your investment cost-effectively,” the Insurance Information Institute’s Homebuyers Insurance Handbook states.
What do your clients need to protect against? Do they have enough insurance? “Homeowners can do their part by being aware of the risks specific to their property and region and taking preventative measures,” the handbook adds. An effect of companies limiting their exposure is that your clients will have to shop around pretty hard, Bolduc says. It gets more challenging to buy a policy. “The thing to remember is that we’re living in an environment that’s going to be difficult for a while,” he advises. “It’s not going to turn around tomorrow. It is something you and your clients ought to be thinking about upfront. It’s a significant part of the monthly expenses, just like taxes are.”
Joe Olivieri is a business writer who frequently writes for Texas REALTOR
