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Storm damage in a neighborhood
Texas Windstorm Insurance Association (TWIA) policyholders will receive an automatic increase in coverage of approximately 11%, reflecting an increase in building costs, and drive up the costs of premiums associated with most policies that accept the added coverage.
The coverage increase is voluntary. Premiums will increase only for policyholders who accept the increase in coverage. The actual increase in premium will vary depending on the specific details of what policyholders have chosen to cover by their policy, TWIA advises.
“TWIA policyholders will receive an automatic increase in coverage of approximately 11%, reflecting an increase in building costs,” TWIA reports. “Premiums will increase for policyholders who accept the increase in coverage but for most policyholders the premium increase will be less than 11%. The increase in premiums is not a rate increase, as it is the direct result of an increase in coverage.”
According to information from the state insurance agency, TWIA policies include an endorsement approved by the Texas Department of Insurance – the Adjusted Building Cost (ABC) Endorsement – that automatically increases the amount of coverage on each policy to keep up with building costs. The 11% increase in coverage is voluntary and will apply to renewing policies beginning in September 2022.
“The ABC Endorsement only increases the level of coverage on physical structures, i.e., your home,” TWIA explains. “Most TWIA policies also cover the contents inside your home, and that part of your coverage is not affected by the ABC Endorsement. As a result, the actual increase in premium will vary depending on the specific details of what you have chosen to have covered by your policy.”
The annual automatic adjustments associated with the ABC endorsement are based on the Marshall & Swift/Boeckh building cost index, which is zip code-specific and incorporates local construction costs, including materials and labor, and changes in demand for construction.
Building costs have gone up since 2020 mostly due to the residual effects of the COVID-19 pandemic on the global supply chain and other geopolitical issues, according to TWIA data. The construction industry is seeing significant delays, shortages and increased prices for many materials essential for construction and repair. Items like shingles, plywood and drywall have all seen double-digit price increases in the last 18 months. Labor costs have seen similar increases.
Policyholders are not required to accept this increased coverage when renewing policies. However, in order to be eligible for replacement cost coverage, TWIA policies are required to have policy limits equal to at least 80% of the estimated cost to rebuild.
TWIA automatically increased the amount of coverage on policies “to keep up with inflation in building costs.”
“If policyholders do not qualify for replacement cost coverage, claims will only be paid at actual cash value,” TWIA advises.
For more information, contact TWIA Policy Services directly by emailing agentservices@twia.org or calling (800) 788-8247.