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How to avoid the 'widow's penalty'
Consumer advocates are highlighting a troubling issue where some insurance companies impose what’s known as a "widow penalty," resulting in higher insurance rates for those who have recently lost a spouse.
Houston - The death of a spouse can be the hardest thing a person can face. But some consumer advocates say a loophole in Texas law is adding to their grief. They say its causing what they call a widow's penalty, increasing their insurance rates.
"He was a retired Oklahoma City police officer," said Pam Kutcha, remembering her husband Jimmie Kutcha.
On July 9th, 2021, Kutcha says her world was rocked when her husband of 25 years passed away.
"He passed away from a very rare cancer," she said.
After notifying her insurance companies of his death, Kutcha says her homeowners' insurance went up about $100 for a six-month policy, despite no other changes in her circumstances.
"I have a perfect credit rating, both of us did. Neither one of us ever had an insurance claim," she said.
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And she says her auto insurance went up $160 a year.
"Somebody decided that the day your spouse passes, you become a higher risk for your insurance companies," she said.
Consumer advocates at Texas Appleseed say their research over the last several years finds some insurers in Texas charge widows higher rates, and sometimes widowers, too.
"Ninety-five dollars a year was the average bump we saw people facing because they lost their spouse," said Ann Baddour, Director of the Fair Financial Services Project at Texas Appleseed.
The Consumer Federation of America studied the issue nationwide in 2015, finding some insurers raised rates for widows 5% to 25%.
"The idea that an insurance company would turn to a widow and say instead of sending you flowers, we’re sending you a price increase, just seems outrageous and unnecessary," said Doug Heller of the Consumer Federation of America.
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But the Insurance Council of Texas argues that insurance rates are based on a wide variety of factors.
"The community you live in, what your claims' history was, how long you’ve been with the company. It’s not this one thing that changes your rate," explained Richard Johnson of ICT.
And Johnson points out that Texas law prohibits discrimination in insurance pricing.
"In Texas, it's actually illegal to rate based off of marital status, age, gender, all those things," said Johnson.
"If there’s such a prohibition on it, why do they keep on doing it?" reacted Heller.
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Baddour says that Texas law has a loophole.
"If the company can come up with some kind of actuarial justification, then they’re allowed to do it," said Baddour.
Some states have banned the so-called widow penalty, including Rhode Island, Delaware, Maryland, Massachusetts, Michigan, and Pennsylvania.
Kutcha and these consumer advocates want Texas to follow suit.
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"As widows, we are not out, running in the streets and doing crazy things to make our rates go up. If anything, most widows and widowers are sitting in their homes for a year, trying to pull it all back together again," said Kutcha.
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Texas Appleseed is urging drivers to contact state legislators and call for change.
Widows or widowers who believe they have been affected by a widow penalty can file a complaint with the Texas Department of Insurance.