Could new catastrophe insurance help cut homeowners' insurance costs?
Houston - Progressive Insurance is the latest insurer to announce it will stop writing new homeowner's insurance policies in Texas, at least temporarily.
Texas homeowners are getting hit with a one-two punch. First from storms that hit the Gulf Coast each year.
Second, from rising insurance rates and fewer insurers.
Data from the Texas Department of Insurance shows homeowners' insurance premiums have increased 44% from an average of $1600 in 2013, to $2300 in 2022.
In 2023, S&P Global reports the average premium rose another 23%.
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Add to that, FEMA's new Risk Rating 2.0 program means National Flood Insurance Program rates are rising for most homeowners. They're expected to go from an average of $775 to $1400 when new rates are fully implemented.
"A lot of that is due to the risk of severe weather in the state, especially in the Houston area, where the risk of hurricanes and tropical storms is a lot more present," explained Chase Gardner with digital insurance agent Insurify.
Progressive Insurance says it has temporarily stopped writing new homeowner’s policies in Texas. And Foremost Insurance, a holding of Farmers Insurance, has stopped as well.
"They're just trying to limit their exposure to some of these high risk states when it comes to natural disasters. But it has the unfortunate effect of limiting the options," said Gardner.
It's a problem that's been happening in California, where many fires have driven up claims, and Florida, which can be hit by several hurricanes a year.
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Texas homeowners who are denied homeowner's insurance can buy it through the Texas Fair Plan Association, but it is often more expensive than private insurance plans.
Gardner says one way homeowners may be able to cut their costs is to buy a separate policy of what's called disaster insurance, also known as catastrophe insurance.
"It allows them to keep their homeowners' insurance policy and raise their deductible to something very high, say $50,000. What disaster insurance does is it offers the difference between your current deductible and a new high deductible," said Gardner.
Gardner says some homeowners save a few hundred dollars a year by buying a separate catastrophe policy. He says in Texas, catastrophe insurance providers include Recoop and Sola.