Texas Insurance Crisis Hitting Home Owners HARD!

It's a bigger risk because someone could look through the window and see no one's been there. They've seen a sign up for the last two months. It hasn't sold. Hey, this opportunity for me to go in and get new fixtures. Yeah. All that kind of stuff like that. Vandalize, live, whatever you want out there. Yeah. So somebody comes in and vandalizes your home while you're out of it, you may not be covered because you're under that clause. So if you are moving out of the home, it is going to be vacant. Make sure you get a vacancy clause. Insurance hell. All right. Everybody is hearing about how insurance is going up across the country. And here in Texas, we are seeing premiums go up, deductibles go up, and a lot of insurance-related things causing homes to be more expensive, cars to be more expensive, all that fun stuff. Today, I have Paul Guerrero with Allstate Insurance. You can call him Paul State for short. But Paul is who I go to when it comes to all my insurance needs. And when clients reach out, we talk to him. I want to go through today and talk about some of the things that are impacting homeowners and impacting people that are getting ready to sell, people that are buying right now. Because a lot of times I have home buyers that are going, hey, I thought insurance was only going to be $800 a month. Why are you quoting me $200, $300, $400? And that's not Paul doing that, but that's just around the country. So Paul, what are homeowners facing right now? This is kind of crazy. We've seen this. I mean, you can't even live in Florida and get insurance anymore. You can't, Florida or California. The good thing about Texas right now is we are still one of the more affordable states in the country and there are still insurance companies doing business in Texas, which is amazing. But unfortunately, a lot of them are starting to pull out of Texas due to profitability. They cannot make money because in the last five years, as you know, we've seen snowmageddon, we've seen icemageddon, we've seen hailstorms that are baseball-sized, softball-sized hails destroying houses. And unfortunately, we've got to pay for that. And there was a tornado. There was a tornado in South Austin recently as well. So we've seen a lot of stuff going on recently as far as storms goes. So because of that, it costs more to fix a house. So what a is increasing people's deductibles. But the normal consumer doesn't know to look at that. They don't know what a deductible means. They don't know how it works. They think it's like health insurance where it builds, but it's not. It's one deductible, one storm. And so 2% is becoming a norm in the business, but not with us. It is the norm with other companies right now. But when we're seeing more and more storms, you've got to make sure you understand what the deductible means and what your out-of-pocket expenses are. So what insurance companies are doing is putting more on you for you to pay more out-of-pocket. Therefore, they pay less out-of-pocket so they can get profitable again. So that's what we're seeing right now is becoming an issue. And then you mentioned the replacement costs. So, I mean, let's talk about replacement costs. So we saw back in 2020, right, the pandemic hit and prices of lumber and everything went drastically higher. And so the price of homes went up. And since when people were getting these insurance quotes and everything, when you built your home, it cost X. Now it costs even more. So walk us through what's happened with replacement costs. Yeah. Prior to COVID, we were recommending anywhere between $125 a foot to $175 a foot for a standard type of house. And that's replacement like if the whole house fell down. Whole house burns to the ground, tear the house down, remove it, rebuild the house. $125 to $175 a square foot. And you got insurance for, let's say, $500,000, right? So your house was a $500,000 house and it was going to be fully burned down, $500,000. Here's what the insurance policy covers, but now it doesn't even cover that. No, the max they're going to pay is $500,000. So during COVID, the price for lumber, labor, and materials skyrocketed upwards of 40%. Some builders will tell you 60 to 80%, but we're going low on a 40% number right now. So the per square foot is increased by at a minimum $225 a square foot, all the way up to upwards of $500 a square foot. Okay. I'll tell you a story real quick about my best friend. One of my best friends is a CPA in town. He bought a house in November of 2021. Brand new $500,000 house, right? 4,000 square foot. Great. His house burns down in February of 2022 after snowmageddon. Okay. It costs $799 to rebuild that house four months later. That's how much of a crazy numbers we're seeing right now. So it is your responsibility as a consumer to make sure your policy is kept up with the inflation that we're seeing right now, because the max you're going to pay is that number that's on that piece of paper. Wow. That's crazy. So how much was he out of pocket in that scenario? Well, had he not been with Paul State, he would have been out of pocket $300,000. But luckily we had a great policy. We had some great conversations with Allstate. We're able to get taken care of, but that is not the norm. So what should people be asking in their policy? So if they're putting a policy together right now, right? Obviously they want the lowest policy, but what should they be asking for replacement costs? At a minimum of $225. And my recommendation is you need to have a conversation with your agent and have them do their recommendations for your house. Therefore, the liability is on your agent. It's not on you. You did a review with your agent. Now they are now responsible to make sure that that coverage is correct for you. But if you've got an 800 number and you're kind of SOL in that situation. Yeah. I mean, look, and a lot of people think now that they don't need a realtor, that they're going to go straight to the listing agent. That listing agent's not going to actually give you that information. Having experts like Jeremy is critical. Who knows a market, who knows the local market, not to the general market. So knowing hyperlocal is critical right now than it's ever been before. By the way, I did not pay him to say like Jeremy. He's just good on video. Exactly. So, all right. So what are some of the other things that people are facing? All right. So obviously replacement costs, deductibles have gone up. What are some other things that homeowners and sellers are facing? Just really understanding that you have to maintain your house. It is your responsibility as a homeowner to take care of your house the same way you take care of your car. Jeremy, how often are you supposed to change the oil in your car? What is that? Like every two, three years? Oh yeah. Two, three years, right? Correct. So that's the problem that people see. You're supposed to change your car every six months or every five, 7,000 miles. Here's a problem. Most people don't change the oil in their home for five to 10 years. It is your responsibility as a consumer to have your house updated, oil changed, the soffits updated, make sure that the caulking around the windows, around the roof is not decaying. Because over time with our extreme weather we're having right now, the caulking just degrades and then the water goes to the roof, goes through ceilings. We have a lot of water damage that could have been easily prevented if you just maintained your house. So having a professional walk your house or roofer walk your house every three to five years is critical, like changing your oil. So that's one thing that's critical that consumers just don't know. They just live there until something bad happens, but you got to maintain your house when you do your car. Yeah, that's one thing. So we have roofers that we work with when we go in under contract and so they'll look at the roofs. A lot of times they just recommend doing a caulk and seal on the roof. So yeah, I mean, there's a lot of different maintenance things that you're going to get into as a homeowner. So it's really important you know what to maintain. That's why it's good to have somebody who kind of knows what's up. Yeah, look what's good. Look what's good. Hey, one thing I was going to say too, Jeremy, is you never just want to file a claim. We talked about this before, the CLU report. You never just want to, hey, a hailstorm came through town, just file a claim and see what happens. That counts against you for the next five years. It pops up on a CLU report and if it's not paid or if it's a zero paid loss, it will count against you. So what I always recommend me and Jeremy talk about all the time is getting someone out there first to look your roof over, a roofer to look your roof over, make sure it's enough to file a claim. It's above the deductible or it justifies filing a claim because if your deductible is $5,000 and the damage is $6,000, I would never file that claim. You want to use me for catastrophe, not for small stuff. And so you got to determine in today's market, is it worth filing a claim or not? How much I want to cut out of my pocket before I file a claim. Yeah. And that's important to know too, because you need to have a good roofer, right? There are roofers out there that are coming out and they're like, anytime a hailstorm comes through, you'll see all the signs in the neighborhood, right? Because that's what they're doing. They're trying to file those claims. And if you're filing a claim and then the insurance goes, well, that's not really a claim, that still shows up as a claim. And so what the CLU report is, is when we put a homeowner contract, we actually have Paul run a CLU report. And so they look to see what the damage is or what's- Claims. Claims have been on the home. And what's interesting is that if you don't do that due diligence and you're a home buyer and now you're under contract, Paul was literally just telling me a story about this. They got to the day of closing and they reached out to Paul because the other insurance company couldn't cover the deal because there was too many claims on that home could actually prevent you from being able to buy that home because they can't get insurance, especially if you have a mortgage. And even if you're buying a home without a mortgage cash, you definitely still want a good policy. 100%. It's just a history. It's a carved fax on the house that you're buying for the last five years. And even if it's a zero-pay claim, it's still going to pop up in that situation. So it's critical to get that. Having an agent who understands the process on day one of the period to do that is critical because you just don't want to get to a week before closing and find out this house had three prior water losses and insurance went from $1,200 a year to $5,400 a year. And now we can't close because we have a DTI issue. So you just want to try to avoid all drama as much as possible, but having quality people, professionals who are local, who understand the market. So I'm breaking things down into terms you can understand. So he said DTI issue. So if you're a home buyer and you're buying a home, that's debt to income ratio. And so what a lender looks at is the debt to income ratio. So if you're close, let's say it's 43% and with the insurance, you're close. And then you come back two days before and you get ready to close. And now the DTI is higher because the insurance is higher that could prevent you from actually being able to close that. And then you got to go find maybe a cut rate insurance company that's going to give you a lower premium that doesn't cover things. So then your house burns down six months later by accident, nobody's burning down your house. But then something happens tragically to your home and then you're not fully covered. And that's one thing that I see a lot of people do too. And they make the mistake of getting not enough insurance, like on my car, general insurance, all the other stuff. What are some of the other things that people are really facing as far as insurance and maybe something they can get around it? I get on average seven to 10 phone calls a day having a claim. You know when no one ever asked me to get in a car accident. Hey, Paul, what's my premium again? They say, am I covered? They want to know. They don't care about their premium at that point. Hey, I just reentered someone and they're hurt and they drive a Mercedes and we've got problems. Hey, Paul, am I covered? I mean, you're telling the difference between am I covered and what the deductible is. Why would that be important to know? The deductible is your out-of-pocket expenses up front. And so you need to know that number because you got to determine if it's worth filing a claim or not. Realistically in today's world, insurance companies are paying catastrophic losses. So you got to know what your out-of-pocket is. Is it worth filing? Can I afford it? That's the thing too. So yeah, they're dealing with those kinds of things out there. So we've talked about roofs and claims, insurance, deductibles, all that stuff. There's two things too that we should talk about. One happens to be with sellers. So right now, what I'm seeing with a lot of sellers is they are leaving Austin, right? They're going from Austin to somewhere else or maybe they're going from Dallas to somewhere else. So one thing that I see is a lot of vacant homes. And right now on the market in the Austin area, over 50% of the homes available for sale right now are absolutely vacant. Now, what if something happens to a home that is vacant? It's been vacant for, let's say, 75 days, right? It's been on the market 75 days. Obviously the days on market has gone up in Austin. What is something that could happen to a homeowner? Are they insured if something happens, even though they have insurance and they've been out for 60 days? So I'm giving you general information here, okay? Almost every insurance company has what's called a vacancy clause in their contract. And what it says is if that house is vacant for 30 to 60 days, some are different, then the policy all but voids. It would cover like a lightning strike, hail damage. But if someone breaks in and steals the copper, the pipes, the fixtures, if squatters move in there, if an AC line runs and overflows and floods a house... Remember in February, it went from like 80 degrees to 20 degrees overnight? Oh, yeah. Had a ton of water burst claims from that storm. And so that's not going to be covered by the policy unless you have the vacancy clause. You add the vacancy endorsement to your policy, or you buy a vacancy policy. But so many... As we host a property tour here in town, we continuously see houses that are completely vacant, but the average person doesn't realize the cover is all but voided when that kind of stuff happens. Because they're not in the home. They're not living in the house. It's a bigger risk because someone can look through the window and see no one's been there. They've seen a sign up for the last two months. It hasn't sold. Hey, this opportunity for me to go in and get new fixtures, all that kind of stuff like that, vandalize, live, whatever you want out there. Yeah. So somebody comes in and vandalizes your home while you're out of it, you may not be covered because you're on that clause. So if you are moving out of the home and it is going to be vacant, make sure you get a vacancy clause. One other thing that really hits Texas, in central Texas, hard is the issues with trees. Now you wouldn't think that trees would be a massive issue considering how much we love trees in the Austin area. But let's talk about trees because trees are one of those things that could really harm in one of these storms that come through. Correct. When we had ice again a few years ago, continuously had claims where large trees, just from the weight of the ice, fell on people's houses and caused major damage. Cars, roofs, siding. People? People, exactly. I mean, our governor here in Texas, he's a victim of a tree limb falling and causing him to be paralyzed. And so it's a really big deal. Insurance companies are taking it very serious. The tree limbs have to be away from the house, up and away. And I don't want to even mention that we have a lot of houses here in Austin, we love our trees, that the house is built around a tree or is a tree where the roof line is right up against it. That has become a problem because as it gets weight and as it grows, it continues to fall on the house and causes major, major issues. So could that be things that aren't covered in a policy or they get around? They will be covered in most scenarios. But as a new consumer, when you find someone in a new house, we're not going to insure that property because we know we're about to walk into a pretty big situation. So trees are serious, especially for someone who's getting a new policy. Someone's had a policy for a long time. It may not be an issue, but it's an issue for you because it's going to fall on your house and cause a lot of drama that you don't want in your life. What about when my tree that's right on the line falls on my neighbor's house? Who's responsible for that? We love this situation because we had a lot of those type of claims. So we live next to each other and my tree on my side falls on Jeremy's house. Who's responsible? If it's due to the storm, Jeremy's responsible. So Jeremy's insurance is going to pay for this tree that fell on his house. But if my tree falls on my house, obviously my insurance is responsible. But here's the caveat there. If the tree on my side of the lawn is dead and I knew it was dead and then it falls on your house, that is potentially not covered loss. So you've got to make sure you understand that if a tree is dead, it's your job to make sure that thing is cut back so it doesn't fall on somebody or somebody else's house. And then the other one we always run into is my tree limb is over the top of your house. In order for it to be covered, you have to email me, text me, and send me a letter saying I need you to cut that thing away from my house because I don't the liability of it. As long as you have that, then my insurance is not responsible. So if that tree falls on your house and you've got proof that you let me know about it, guess what? My insurance is not responsible. So you take the liability off of yourself. So no one knows that. You've got to put it in three forms of writing, text, email, and a letter saying you asked me to do that. Correct. However you want to do it. Exactly. Awesome. All right. So we've given you a lot of information in this video. If you want to reach out in Texas, anywhere in Texas, and you need a good insurance person, I definitely recommend reaching out to Paul. His information is going to be in the description below. If you are looking to buy or sell in the Austin area and you want somebody that knows what they're doing, my wife is the best real estate agent in Austin. We'll see you next video.