Texas Wildfires & Homeowners Insurance

The winter wildfires in Texas have prompted media and community concerns. Will these fires, which include the so-called Smokehouse Creek Fire (now the largest wildfire in the state’s history), become a homeowners insurance nightmare?​ To address this, we asked the TRERC Research Staff to consider three primary questions.​​

Are more homes insured in Texas metro areas than in the state’s rural communities?

Several factors influence whether a homeowner has property insurance. Two are particularly important because of the demographics in many rural areas. 

Data show ​Texas’ rural areas tend to have older population profiles, and they tend to have lower income levels. Both of these can lead to lower rates of property insurance coverage. Consider that mortgage lenders require borrowers to maintain property insurance. This protects the home, which is the collateral for the loan. Once a household owns the home outright (“free and clear”), maintaining insurance coverage becomes a matter of personal choice (see figure below for percentage of homeowners in some Panhandle counties who currently do and do not have a mortgage). Homes owned outright tend to be owned by older individuals, many of whom may be retired and thus have lower, fixed incomes. So they may choose or be forced to forgo insurance.

Will many properties impacted by wildfire damage lack homeowner insurance?

Yes, but this is speculative without directly assessing the status of those who lost property. What we can say is that the share of homes without a mortgage in the most impacted counties ranges between 50 and 60 percent (higher ownership). Statewide, that share is 43 percent. A much higher share of households in those counties no longer have a lender requiring them to keep insurance.

Will property owners have consequences for lack of coverage?

Rebuilding without insurance is a great burden. Some households will have other sources of wealth to pay for rebuilding. Many will not. The homes in the most impacted counties are older. Owners may not appreciate the gap between their original sale price and the cost of replacement in today’s market. 

In the impacted counties, 11 to 23 percent of homes were built after 1990. Statewide the share is 49 percent. This age difference is reflected in lower monthly ownership costs in these counties compared to​ statewide. Outside the small metro areas like Amarillo, most of these Panhandle counties have been losing population for some time. If homeowners cannot rebuild, they are likely to relocate, adding to the out-migration trends.