The East Coast has hurricanes, and the West Coast has wildfires. But in the middle of the country, homeowners face a different kind of disaster: baseball-sized hail. “The damage is just catastrophic,” says Avery Moore, owner of Oklahoma-based independent insurance agency ECI Insurance.
As insurers scramble to keep up with record losses from hail and the storms that produce it, homeowners in the “hail belt” pay the price. The highest U.S. home insurance rates are now in the middle of the country, with Oklahoma, Nebraska and Kansas leading the pack at more than double the national average, according to NerdWallet data.
To put that into perspective: The average homeowner in hurricane-prone Florida pays $2,845 per year for homeowners insurance. The average Oklahoman pays $7,255.
Why hail is breaking the market
Shifting storm patterns are at least partially to blame. According to Jeff Schmidt, a meteorologist and vice president at reinsurance broker Guy Carpenter, research suggests that the part of the atmosphere that can produce this baseball-sized hail is expanding both eastward and northward.
But it’s not just that storms are moving. There are also more homes in their way.
This is called the “expanding bull’s-eye effect.” Picture a city as a target, with a dense urban center surrounded by rings of suburbs and rural land. In fast-growing cities like Dallas, those rings are pushing outward.
“Cities are bursting at their seams,” Schmidt says. “If we're shooting something at the target — whether it's a bow and arrow or a dart or … a weather event — now you have a bigger target.” A single hailstorm that might have hit an empty field 50 years ago could now result in thousands of totaled roofs.
Paying more for less coverage
In addition to raising premiums, insurance companies can respond to losses by adjusting policy details like coverage amounts and deductibles.
For example, it’s common for policies to include a separate wind and hail deductible set to a percentage of the home’s insured value instead of a flat rate. So, instead of a typical $1,000 deductible, repairs for hail damage might be subject to a 1% to 5% deductible. If you have $300,000 of dwelling coverage, that’s $3,000 to $15,000 you have to pay out of pocket before a single shingle is covered.
Insurers are also moving away from offering replacement cost value (RCV) coverage — which pays for the full cost of repairing covered damage — toward actual cash value (ACV) for older roofs. Under an ACV policy, the insurer pays out the depreciated value of an aging roof, leaving you to cover the gap. While Moore recommends pushing for full replacement coverage, she says many carriers simply won't offer it once your roof hits the 10-year mark.
“If your roof is insured at actual cash value and it's 15 years old, you're not going to get a lot of money back,” Moore says.
The non-renewal dilemma
Insurers can also drop homeowners entirely if they’re seen as too risky. You can receive a non-renewal notice for a number of reasons, and making too many claims is one of them.
Take one of Moore’s clients who lived in a 7,000-square-foot home. After discovering a roof leak, she hired a roofer to do a temporary fix to avoid filing a claim. The roofer found extensive hail damage, so she ended up having to file a claim anyway. It was denied. When the quick fix failed during the next hailstorm, she filed another claim, along with a claim on her auto insurance.
“We're looking at three claims within the three-month period,” Moore says. “And guess who got non-renewed?”
This can leave homeowners in a bind. Paying for small repairs out of pocket can protect your insurability, but Moore’s client did just that and ended up losing her policy. For some, it can feel impossible to win.
How to lower your 'hail tax'
Whether you can't afford your premiums or you just want to lower your rates, here’s how to stack the odds in your favor.
Shop around
If your homeowners insurance is too expensive, shop for other options before your coverage lapses. An independent agent who knows the local market can help you find carriers you might miss on your own.
The deductible you choose for your policy could also lower your bill. NerdWallet data shows that increasing a deductible from $1,000 to $2,500 leads to an average premium decrease of 9%.
Finally, check the financial ratings for any insurers you’re considering through AM Best, an independent agency that rates an insurer’s ability to pay out claims. “Even though B is good in school, B is not great in insurance,” Moore says. Look for an “A” rating to ensure the company can survive a catastrophic storm season.
Think carefully before filing a claim
NerdWallet’s editorial team found that premiums are 10% higher, on average, for homeowners who have made just one claim compared to those with a clean record.
For minor repairs that fall near your deductible, paying out of pocket might save you more in the long run — as long as the job is well done. Make sure to protect your home from further damage right away, or you could face a denied claim in the future for failing to mitigate the loss.
Avoid 'storm chasers'
After a big storm, salespeople will often go door-to-door in affected neighborhoods offering to inspect or fix roof damage. Don’t answer the door, Moore says.
“We deal with a lot of fraud where they take the money for the down payment or they do a shoddy job, and just as soon as they blew in here with the storm that brought them, they're gone.”
Instead, look for local, licensed contractors with liability insurance and good reviews. Ask to see proof of insurance and a license number. You can verify the license with your state’s licensing agency.
Invest in your roof
Roof-related damage accounts for up to 90% of residential catastrophic losses, according to the Insurance Institute for Business & Home Safety (IBHS).
Upgrading to the Fortified roof standard — a system developed by IBHS that involves sealing the roof deck and reinforcing its edges — can lead to discounts of up to 55% on the wind or hail portion of your premium in some states.
If you replace your shingles, know that just because they’re marketed as “hail-resistant” or “impact-resistant” doesn’t mean they’ll stand up to baseball-sized ice. Several leading brands received a “marginal” rating from the IBHS. Aim for shingles rated “good” or higher.
The article Hail, Not Hurricanes, Is Driving Up Insurance Rates: How to Save originally appeared on NerdWallet.
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