Homeowners Insurance Is Becoming a Bigger Piece of the Affordability Puzzle in Texas

For years, conversations about housing affordability centered on three things: home prices, mortgage interest rates, and property taxes. While those remain important, there’s another expense that has quietly become one of the fastest-growing costs of homeownership—homeowners insurance.

A recent article published in Tierra Grande, the quarterly publication of the Texas Real Estate Research Center at Texas A&M University, highlights just how dramatically homeowners insurance is reshaping affordability across Texas.

As a mortgage professional serving homebuyers throughout Texas, I’ve seen this trend firsthand. Buyers are often surprised when insurance quotes vary by hundreds—or even thousands—of dollars per year for similar homes.

Here’s what every Texas buyer should know.

Insurance Costs Are Rising Faster Than Many Buyers Realize

According to the Tierra Grande analysis:

• Average monthly homeowners insurance costs in Texas increased from roughly $160 per month in 2017 to over $200 per month by 2024.
• Nationally, premiums also increased, but at a much slower pace.
• Insurance has become a significantly larger contributor to the overall increase in monthly homeownership costs since 2022.

While mortgage payments still represent the largest monthly expense, insurance is now responsible for a growing share of the increase in total housing costs.

Why Are Texas Premiums Increasing?

The Tierra Grande study identifies several major factors driving higher premiums:

More Severe Weather

Texas continues to experience:

• Large hail events
• Wind damage
• Tornadoes
• Hurricanes along the Gulf Coast
• Wildfires in certain regions

Insurance companies have paid substantially larger claims over the past several years, which directly impacts future premiums.

Rising Construction Costs

When homes are damaged, they cost much more to rebuild today than they did just a few years ago.

Replacement costs have increased because of:

• Labor shortages
• Higher material prices
• Supply chain issues
• Inflation

Since insurers base coverage on rebuilding costs—not market value—higher replacement costs generally mean higher premiums.

Regional Differences Matter

One of the most interesting findings from the study is that insurance costs vary dramatically across Texas.

The report notes:

• Dallas-Fort Worth experienced the highest average premiums among the major metro areas studied.
• Houston remains expensive because of hurricane exposure and increasing claim severity.
• Austin and San Antonio continue to have somewhat lower average premiums, although both have experienced significant increases in recent years.

Simply moving from one Texas county to another can produce a significant difference in insurance costs.

Insurance Now Impacts Home Affordability

Many buyers focus only on:

• Down payment
• Interest rate
• Monthly principal and interest payment

However, lenders qualify borrowers using the total housing payment, often called PITI:

• Principal
• Interest
• Taxes
• Insurance

Shopping for Insurance Can Save Thousands

One mistake I frequently see is buyers accepting the first insurance quote they receive.

Just like mortgage rates, insurance pricing varies widely between carriers.

Consider these shopping strategies:

1. Get Multiple Quotes

Obtain quotes from at least three to five insurance companies or work with an independent insurance broker who can compare multiple carriers.

2. Shop Early

Don’t wait until the week before closing. Begin gathering quotes shortly after your contract is accepted so there’s time to compare coverage and pricing.

3. Compare Coverage—Not Just Premium

The cheapest policy isn’t always the best. Review:

• Dwelling coverage
• Personal property limits
• Liability protection
• Water damage exclusions
• Roof settlement provisions
• Wind and hail deductibles

4. Ask About Discounts

Many insurers offer discounts for:

• Bundling home and auto insurance
• Security systems
• Newer roofs
• Impact-resistant shingles
• Smart home monitoring
• Claims-free history

5. Consider Your Deductible Carefully

Choosing a higher deductible can reduce your annual premium, but make sure it’s an amount you could comfortably pay after a covered loss.

6. Verify Replacement Cost Coverage

The policy should insure the home for its estimated cost to rebuild—not necessarily its purchase price or market value.

What Does Fannie Mae Require?

For most conventional mortgages sold to Fannie Mae, property insurance must meet specific requirements. Among the key guidelines:

• Coverage must generally be written on a Special Form (or equivalent) policy.
• Required perils include fire, lightning, windstorm, hail, smoke, explosion, vehicles, aircraft, and riot/civil commotion.
• Claims must be settled on a replacement cost basis rather than actual cash value.
• Coverage must generally equal the lesser of:
  • 100% of the property’s replacement cost, or
  • the unpaid principal balance of the loan, provided that amount is at least 80% of the replacement cost.
• Deductibles for required perils generally cannot exceed 5% of the insurance coverage amount.

Your lender will review your insurance policy before closing — for a full walkthrough of the mortgage process, see our North Texas Homebuyer’s Guide to ensure it satisfies applicable agency guidelines.

Don’t Let Insurance Be an Afterthought

Insurance has become one of the fastest-changing costs of homeownership in Texas.

The Tierra Grande research makes an important point: insurance is no longer just another closing requirement—it’s becoming a major driver of housing affordability across the state.

The good news is that informed buyers who shop carefully often save hundreds of dollars per year without sacrificing important coverage.

As your mortgage lender, I encourage every buyer to start comparing insurance options early in the home buying process. Coordinating financing and insurance together can help prevent surprises and keep your monthly payment as affordable as possible.