4 Things to Know Before Changing Insurance Companies

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By: Linda Chapman, Retention – Executive

Executive Summary:

Changing insurance companies can help you save money, but a lower premium doesn’t always mean a better policy. Before switching, compare policy limits, deductibles, exclusions, endorsements, and claims service. Most importantly, don’t cancel your current insurance policy until your replacement coverage is confirmed and active. Understanding these four considerations can help you make an informed decision and avoid unnecessary coverage gaps.

Are you considering changing insurance companies? Maybe your premiums have increased, you’re frustrated with your current carrier’s customer service, or you’ve found a cheaper insurance quote. Whatever the reason, switching insurance companies can be a smart decision, but there’s more to consider than the price.

A lower premium could mean higher deductibles, reduced coverage limits, or missing endorsements that protect you against specific losses. Canceling your existing policy too early could also leave you without insurance when you need it most.

At Grimes Insurance Agency, we help clients compare insurance options and work through the details that can make or break a smooth insurance transition. We’ve seen firsthand why it’s important to look beyond the premium and understand the coverage and service you’re actually receiving.

Before you make a switch, here are four important things to consider.

1. Why are you considering changing insurance companies?

Before looking for a new insurance company, take some time to understand why you’re considering a change in the first place. 

Insurance doesn’t fit everyone perfectly, and we’ve heard plenty of reasons why clients consider changing carriers. Some of the most common answers include:

  • Increasing premium prices
  • Inadequate coverage for their needs
  • Inconsistent communication
  • Disappointing customer service during a claim

While these are all valid reasons to explore other options, it’s important to understand what’s causing the problem before making the decision. 

For example, if your insurance premium has increased, consider whether changes in the insurance market, claims activity, or your individual policy have contributed to the increase. A higher premium doesn’t automatically mean a different insurance company is a better fit. 

On the other hand, if you’re consistently experiencing poor communication, or aren’t receiving the service you expect, exploring other carriers may make sense. 

The first step is understanding what you want to improve. Do you need help personalizing your policy? Read about Grimes’ Approach to Personalized Insurance to learn how you can make your coverage fit better. 

2. What should you compare before changing insurance companies?

If you find a cheaper quote, ensure that it’s a better deal before you make things official. We recommend comparing the policies themselves, not just the premiums. This looks like reviewing items such as:

  • Coverage limits
  • Deductibles
  • Liability limits
  • Exclusions
  • Endorsements
  • Policy fees and discounts
  • Claims service and company ratings

A lower premium can be a smart move if you’re getting comparable protection from a carrier that meets your needs. But if the savings come from lower limits, higher deductibles, or missing coverage, you may be taking on more risk than you realize. 

For example, saving $1,000 a year on your homeowner’s policy could be worthwhile if the coverage is comparable. However, what happens if the new insurance company doesn’t offer an important endorsement you currently have, such as hidden water leakage and seepage coverage?

That missing protection could make the potential savings less attractive if you experience a loss that would have been covered under your previous policy.

When comparing, the goal is to find the right balance between price, coverage, and service. Simply looking for a cheaper policy doesn’t guarantee the right move. 

How should you evaluate an insurance company’s claims service and ratings?

Price and coverage aren’t the only things that matter when choosing an insurance company. You should also consider how the carrier handles claims and what its financial and consumer reputation looks like.

After all, insurance is something you purchase to help protect yourself financially when something unexpected happens. You want confidence that your insurance company will respond appropriately when you need to use your coverage.

At Grimes Insurance, we’ve seen how much these details can matter. In one client’s case, a sewer backup flooded their home from the alley. 

Because the backup didn’t begin on her property, her (SafeCo) policy wouldn’t initially cover the claim. Instead, the incident was considered a city responsibility. However, when the city denied her claim, we alerted her carrier. 

SafeCo stepped in and ultimately agreed to pay her $25,000 claim. The carrier also helped her pursue the matter with the city. 

This experience illustrates why claims handling matters in addition to price. Not all carriers handle similar claims the same way. Coverage depends on the policy language, applicable endorsements, the facts of the loss, and the insurer’s claim determination. 

How do you review an insurance company’s ratings?

Several resources can help you research an insurance company’s financial strength, complaint history, and reputation.

One useful resource is the National Association of Insurance Commissioners (NAIC) Consumer Insurance Search tool, which provides information to help consumers research insurance companies, including complaint information and licensing details.

Screenshot of the NAIC Consumer Insurance Search Tool page.

The Insurance Information Institute also recommends the following resources when comparing:

3. When should you cancel your existing insurance policy?

If your comparison leads you to switch companies, DO NOT cancel your existing company’s insurance policy until your replacement coverage is in place. 

This is one of the most important steps in the switching process. A quote is not the same as an active policy, and an application may still be subject to underwriting requirements or final approval. 

If you cancel your existing policy before your new coverage begins, you risk falling into an insurance lapse. If a covered event occurs during that period, you’d be required to pay for the loss yourself. 

What is an insurance lapse?

An insurance lapse occurs when your existing policy ends and replacement coverage is not active for a period of time. Even a short gap matters, potentially affecting your ability to obtain insurance or the price you’re offered later. 

Lapsed insurance is extremely common when policyholders change companies. It can take time for an insurance policy to be bound with a new carrier, and cancelling your old policy before it’s ready can leave you uninsured. 

How can you avoid a coverage gap when changing insurance companies? 

To avoid this mix-up, stay in constant communication with your agent and don’t cancel until your new coverage is verified. 

Before cancelling your current insurance, confirm:

  • The new insurance carrier has accepted your application
  • All underwriting requirements have been completed
  • You understand the final premium, deductibles, limits, and exclusions
  • You have written, verified confirmation of the new policy and its effective date and time

At Grimes, we get that insurance timelines can get confusing, but you don’t have to face them alone. We’ll help you coordinate the transition so you know when your new policy is active and it’s appropriate to cancel the old one. If you’re considering an insurance company change, call our office to connect with an agent before submitting a cancellation request.

4. How do you change your insurance company?

Changing insurance companies is easier when you follow a clear sequence. Each step has a purpose, and completing them in the right order reduces the risk of missed payments, incorrect policy details, or lapsed coverage. After a conversation with your agent, 

  1. Review your current policy
  2. Gather accurate information for quotes
  3. Compare policies
  4. Complete your new application and any required payment
  5. Confirming your new coverage is active
  6. Cancel your old policy

Following these steps can help you make a smooth insurance transition while maintaining the protection you need.

Grimes Insurance can help you change insurance companies 

Changing insurance companies can be a worthwhile decision, especially if you’re able to find better coverage, service, or pricing elsewhere. But before making the switch, take the time to understand why you’re leaving, compare the actual policy details, research the new carrier, and coordinate your cancellation dates. 

Remember, the goal isn’t about finding a cheaper insurance policy. It’s finding the right protection at a price that makes sense for you.

At Grimes Insurance Agency, we understand how important it is to feel confident in your insurance coverage. With a network of 100+ insurance carriers, we’ve helped clients navigate policy changes, compare carriers, and work through the details. 

If you’re considering changing insurance companies, call our office to connect with an agent. We’ll help you evaluate your options, understand the differences between policies, and determine what makes the most sense for your insurance needs. Or, if you’re still debating, learn more about coverage gaps and learn How to Tell if You’re Underinsured.

Frequently Asked Questions About Changing Insurance Companies

Can you switch insurance companies at any time?

In many cases, you can change insurance companies before your existing policy expires. However, your current policy’s cancellation terms may affect the process, including whether cancellation fees or other charges apply.

Review your policy and speak with your insurance agent before making a change.

Will you receive a refund if you cancel your insurance policy early?

You may receive a refund for the unused portion of your premium if you cancel your policy before its expiration date. However, the amount depends on your policy’s cancellation terms and whether any fees or other charges apply.

If your homeowners insurance premium was paid through an escrow account, you may have additional questions about what to do with your refund. Read our article, Got a Refund Check from Your Old Insurance Company?, to learn what happens to that money and whether it needs to go back to your mortgage company.

Ask your current insurance company how it calculates refunds before canceling.

Does changing insurance companies affect your insurance history?

Switching insurance companies doesn’t automatically erase your previous insurance history. New insurers may consider factors such as prior coverage, claims history, and previous lapses when evaluating your application.

Maintaining continuous coverage is important when transitioning between carriers.

General Liability vs. Professional Liability: What’s the Difference?

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By: Carlos Chavira, Commercial Lines – Executive

Executive Summary:

General liability insurance generally covers claims involving third-party bodily injury, property damage, and certain personal or advertising injuries. Professional liability insurance, also called errors and omissions (E&O), generally covers claims alleging mistakes or negligence in professional services. Depending on your business, you may need one or both.

The business world is full of risks. You might be a coffee shop owner who missed a spill on the floor… and a customer slipped and fell. Or maybe you’re a marketing consultant whose client claims your recommendations cost them thousands of dollars.

Both situations could lead to a claim against your business. But would the same insurance policy protect you in each case?

That’s where understanding the difference between general and professional liability becomes important. Choosing coverage based on risks you assume are taken care of can leave you with gaps when you need protection the most.

Since 1948, Grimes Insurance Agency has helped West Texas business owners understand their insurance options. As an independent insurance agency, Grimes helps businesses evaluate their risks and compare coverage options based on how they actually operate. 

By the end of this article, you will know:

  1. What general liability insurance covers
  2. What professional liability insurance covers
  3. Which coverage your business needs

Image depicting differences between general liability and professional liability.

What does general liability insurance cover?

General liability insurance protects your business when your day-to-day operations cause physical harm or property damage to someone else. It generally covers:

  • Bodily injury (slips, falls, or harm to another person)
  • Property damage (damage to another person’s property)
  • Advertising injury (certain offenses such as libel, slander, etc.)

For instance, let’s go back to the coffee shop example. If a customer slipped on a spilled drink and claims your business was responsible for their injury, general liability insurance may respond to the claim. 

For contractors, general liability can be particularly important because work often takes place around customers, other workers, and someone else’s property. 

Who is general liability insurance best for?

Arrow labeled "customer injured after slipping" points to a box labeled "general liability insurance"

If your business interacts with customers, works on property, or creates risks of third-party injury or damage, general liability coverage is an important piece to evaluate. 

  • Contractors and construction businesses
  • Retail stores
  • Restaurants
  • Businesses that work on clients’ property
  • Businesses that regularly serve customers at their location

What does professional liability insurance cover?

Professional liability insurance, also known as errors and omissions (E&O), generally addresses claims alleging:

  • Errors
  • Omissions
  • Negligence
  • Failures in professional services. 

In plain English: if a client makes a claim about an unanswered promise or a failed service on your part, professional liability can help cover it. 

For example, imagine that you’re an accountant who makes a clerical error on a client’s tax return. Your error costs them thousands of dollars in IRS penalties, leaving you to clean up the mess. In this situation, professional liability coverage could help you pay for what you owe.

Arrow reading "costly clerical error" pointing to a box labeled "professional liability insurance".

Who is professional liability insurance best for?

This type of coverage is particularly relevant for businesses whose clients rely on their expertise or professional services. 

More specifically, we recommend professional liability insurance for businesses like:

  • Marketing, design, or creative firms
  • Financial consultants
  • Legal advisors
  • Architects
  • Engineers
  • Real estate agents
  • IT and tech specialists

Even when a business delivers its services carefully, a client can still make a claim that its work caused a financial loss. Professional liability coverage can help address that type of risk, subject to the policy’s terms. 

What’s the difference between general and professional liability insurance?

The main difference between the two coverages is the type of claim each policy addresses.

General liability focuses on third-party injuries and property damage, while professional liability focuses on claims related to professional services. Let’s break it down visually:

General Liability Professional Liability
Main focus Certain bodily injury, property damage, and personal or advertising claim Claims about errors or negligence in professional services
Claim example A restaurant serves contaminated seafood, resulting in multiple patrons becoming hospitalized due to severe food poisoning An architect produces an incorrect blueprint, causing the contractor thousands of dollars in construction issues. 
Commonly relevant for Contractors, retailers, restaurants, and other customer-facing businesses Consultants, accountants, designers, and other professional service providers

Should my business ever have both general and professional liability insurance?

Depending on your business operations, possibly. 

General and professional liability policies both cover specific risks, and some that one type of business may see more than another. However, there are some businesses that benefit from both coverages.

For example, a contractor might need general liability coverage for a property damage claim on their job site, as well as professional liability if a client claimed an error in their construction design. The same can apply to a marketing specialist who offers consulting services, while also working with clients at their business location.

The issue we see most businesses run into is assuming what is covered by one policy is still covered by the other. But that isn’t true. At the end of the day, a business could face a number of different risks. At Grimes, we see businesses with a combination of general liability and professional liability insurance often have the best of both worlds. 

The right combination depends on your business activities, contractual requirements, policy terms, and understanding how potential risks are covered, rather than assuming when they occur. 

If you’re feeling overwhelmed trying to decide, you don’t have to think it through alone. Call our office anytime to connect with a Grimes agent. We can help you identify potential gaps and determine which coverages make sense for your business.

Grimes Insurance can help your business find the right coverage

General liability and professional liability insurance address different kinds of claims. General liability focuses on certain injuries and property damage, while professional liability addresses claims related to your business’s services and expertise. 

Understanding that distinction can help you ask better questions about your coverage and identify potential blind spots. As an independent insurance agency serving West Texas for over 78 years, Grimes Insurance can help you make the right decisions. With a network of 100+ carriers, we’re prepared to help you review your business’s risks and explore available options. 

If you’re ready to review your coverage with an agent, start by requesting a business quote online. Or, if you’re still unsure, read What Happens if a Business is Underinsured? to learn how to prevent gaps for your business. 

Frequently Asked Questions

Does general liability cover professional mistakes?

Generally, general liability is not designed to cover claims arising solely from professional errors or advice. Professional liability may address those claims, depending on the policy.

Can a small business need both policies?

Yes. A small business can have both physical operational risks and professional services exposures. Whether both policies are appropriate depends on the business and its requirements.

Is general liability insurance required in Texas?

Requirements depend on the business, applicable rules, and contractual obligations. Some customers and projects require coverage even when a universal requirement does not apply. Confirm the requirements relevant to your business.

Why Do Commercial Insurance Rates Change?

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By: Carlos Chavira, Commercial Lines – Executive

Executive Summary:

Commercial rates change because of your business operations, claims history, and broader insurance-market conditions. Even if nothing obvious has changed, your premium may increase because repair costs are rising, carriers are adjusting pricing, or fewer insurers are willing to cover your business’s type of risk. You can’t control every factor, but you can prepare by keeping your business information current, managing preventable losses, reviewing your coverage, and starting the renewal conversation early.

You open your commercial insurance renewal and see a higher premium than you expected. You haven’t filed a major claim or made any obvious changes to your business. So why are you paying more?

It’s frustrating when insurance costs change without a clear explanation. But a business premium increase doesn’t automatically mean you’ve done something wrong. The reason could be something about your business, something happening in the insurance market, or a combination of both. 

Grimes Insurance Agency has helped West Texas business owners navigate commercial insurance since 1948. Understanding what drives rate changes can help you ask better questions, evaluate your options, and prepare for renewal before you’re under pressure to decide. 

By the end of this article, you’ll understand:

  • How business changes affect your rate
  • How the insurance market affects your rate
  • What to do with the rate factors you can control

Why do commercial insurance rates change?

Commercial insurance rates generally change for two broad reasons: changes in your business and changes in the insurance market. Understanding the difference can help you identify which factors you can influence and which ones are outside your control.

How can changes in your business affect your commercial rate?

While it might seem like a magic number, your premium is carefully evaluated during a process called underwriting. Each insurance carrier uses its own rating formula based on something we like to call their “risk appetite”. Your industry, operations, exposure, and claims history are what set the table for it. For instance, a roofing contractor has a different set of risks than an interior designer. 

A weighted scale with the words "Roofer's Risk" weighing it down on the heavier side, and the words "interior designer risk" on the lighter side.

Common factors for a changing premium include:

  • Your industry and the work you perform
  • Your revenue and payroll
  • Your claims history
  • Changes in your operations

When those items change, your coverage and premiums change with them. For a closer look at how sales, payroll, classifications, and additional factors influence contractor premiums, read How Much Does Contractor Insurance Cost?.

How does the insurance market affect your commercial rate?

If you’re thinking to yourself, “But nothing about my business or its operations has changed…”, there’s another factor to consider: the insurance market. 

Insurers also respond to broader market conditions that can affect the cost and availability of coverage. The conditions can include:

  • General inflation
  • Higher repair and replacement costs 
  • Reduced competition
  • Severe weather losses
  • Changes in an insurer’s risk appetite

When insurers face more expensive claims, they may adjust pricing to account for the increased cost of providing coverage across the market. These conditions can also vary by location and type of business.

How do West Texas conditions affect your commercial insurance rates?

In hail-prone areas like West Texas, severe weather can affect commercial property pricing, coverage availability, and deductibles offered. 

Following the June 2025 tornado, our Grimes team observed significant increases in commercial wind and hail deductibles across Lubbock. In some cases, deductibles that had been around 2% increased to approximately 6% due to the storm’s massive number of damage-related claims. 

Your premium or out-of-pocket costs can increase even when your business hasn’t changed. That’s why understanding what’s driving the increase is an important first step.

Which commercial insurance rate factors can you control?

While you can’t control things like inflation, severe weather, or the decisions your carrier makes, you CAN take steps to prepare your policy. Let’s break down how you can keep your policy accurate, manage preventable risks, and make informed decisions about your coverage. 

1. Keep your business information up to date

Your insurance policy should reflect the business you operate today, not the business you ran a year ago. 

Think about what may have changed since your last renewal:

  • Have you added a new service or type of project?
  • Has your payroll or revenue changed?
  • Have you purchased or sold vehicles, tools, or equipment?
  • Have you added employees or expanded to new locations?
  • Have your contracts or subcontractor agreements changed?

If you answered yes to any of these questions, your insurance agent wants to know about it! Your premium might change depending on how your carrier evaluates your company’s risk… but outdated information can create costlier problems beyond pricing. It may also mean your coverage no longer reflects the work you’re doing. 

For example, many of our clients have expanded their businesses to include multiple trades. A plumbing contractor wanted to begin offering HVAC services. Because they shared this with their agent, our commercial team helped them modify their existing policy before they took on an uncovered job. 

Business growth is something to celebrate! But if your insurance doesn’t follow suit, coverage gaps will begin to affect your rates more than a policy change.

If you’re looking for ways to prevent coverage gaps, learn about 4 common contractor insurance gaps you can avoid.

2. Manage preventable losses

Workplace injuries and property damage can create high costs for businesses. According to the Occupational Safety and Health Administration (OSHA), Liberty Mutual estimated that employers paid more than $1 billion per week for workers’ compensation-related claims in 2025. Ouch! 

How can claims affect your workers’ compensation insurance rates?

If your business carries workers’ compensation insurance, claims history can affect your premiums through the experience modification factor (EMOD). 

Your EMOD is a value that compares how your business ranks against others in your industry based on your workplace losses. A lower EMOD decreases your premium. A higher EMOD can increase it. 

For a deeper dive into EMODs, watch this video to learn more about how they affect your business and premiums:

You can’t prevent every accident, but you can take steps to reduce some of the risks that lead to a higher number of claims. 

Depending on your business, that could mean:

  • Training employees on safe work practices
  • Maintaining vehicles, tools, and equipment
  • Following job-site safety procedures
  • Addressing known property hazards
  • Reviewing previous losses to identify patterns
  • Consider paying smaller claims out of pocket

Should you file a commercial insurance claim or pay out of pocket?

If your business does face an accident, paying for damage out of pocket can be one of the best ways to prevent your insurance rate from increasing. It sounds backwards; we know. But your business’s claims history directly affects your company’s risk profile and insurance premium. 

If your business can pay smaller claims out of pocket, it may be worth considering. However, your policy terms, the size of the loss, potential liability, and reporting requirements all matter. 

Getting another perspective and talking through these items with your insurance agent can be helpful. If you’re looking for someone to help you identify your business’ potential blind spots and where you may be able to reduce risk, call our office to connect with our commercial team. Our agents are available to provide advice wherever you’re at in the process.

3. Review your coverage, deductibles, and exclusions

Remember that your premium is only one part of your insurance policy. Your coverage limits, deductibles, exclusions, and covered operations also determine how your business is protected. 

Increasing a deductible may reduce your premium in some circumstances, but it also means your business would pay more out of pocket for a covered loss. 

Two sets of arrows. First set includes a downward pointing arrow labeled "lower deductible" with an equal sign leading to an upward pointing arrow reading "higher premium". Second set includes an upward pointing arrow labeled "higher deductible" with an equal sign leading to a downward pointing arrow labeled "lower premium".

Before changing your policy, consider:

  • Could your business comfortably afford the higher deductible?
  • Are your liability limits appropriate for your contracts and operations?
  • Do your property and equipment values reflect what you need to insure?
  • Are there exclusions or coverage limitations you should understand? 

We’ve seen clients learn about exclusions the hard way. Once, a roofing company was insured under a policy that excluded hot work, a common labor (involving heat and torches) roofers use for their services. 

However, after using this method on a client’s home, an accidental fire started and spread to the garage, causing $89,000 worth of uncovered damage. Because their policy excluded hot work, insurance didn’t cover any of the damage, and their business had to shoulder the full amount!

The most expensive commercial costs can come from simply misunderstanding your policy or having inadequate coverage where your business needs it the most.

4. Compare your renewal options

Different insurance carriers evaluate businesses differently. One carrier may be more competitive for your industry, while another may offer a better fit for your operations or coverage needs. 

Shopping for business insurance with an agent shouldn’t feel like going in blind. If your renewal premium increases, ask your agent to explain the change and whether other options are available. At Grimes, we want to help our clients be prepared and knowledgeable in every part of their policy.

When comparing quotes, we encourage you to look beyond the total price. You should review:

  • Coverage limits
  • Deductibles
  • Exclusions and limitations
  • Covered business operations
  • Other important policy terms

A lower quote isn’t necessarily a better deal if it provides less protection. Make sure you’re comparing similar coverage before deciding whether to switch carriers.

Grimes can help you review your commercial insurance options

Commercial insurance rates can change for many reasons. Some are connected to your business operations, claims history, or coverage choices. Others reflect insurance market conditions, locality, and risks outside of your control. 

The first step is to understand what’s driving the change. From there, you can determine whether your policy needs an update or whether it makes sense to compare options from other carriers. 

Grimes Insurance Agency has helped West Texas business owners through these kinds of decisions for over 78 years. As an independent agency with a network of 100+ carriers, we can help you review your current coverage and explore whether additional carrier options are best for your business.

If your premium has increased, or you want to be better prepared for your next renewal, contact our office to review your options together. Or, if you’re not quite ready to discuss your business needs, read our Guide to Comparing Contractor Insurance Quotes to learn what to evaluate before deciding on your policy. 

You may not be able to control every commercial insurance rate increase, but you can take steps to understand your options and make informed decisions about your coverage.

Frequently Asked Questions

Why did my commercial insurance premium increase if I didn’t file a claim?

Your premium may increase because of broader insurance market conditions, rising repair or replacement costs, severe weather losses, or changes to your carrier’s underwriting guidelines. Your business information and coverage terms can also affect the price.

Can changing my business operations affect my commercial insurance rate?

Yes. Changes to your services, payroll, revenue, equipment, or locations may affect how a carrier evaluates and prices your coverage. Tell your agent about significant changes so your policy can be reviewed.

Will raising my commercial insurance deductible lower my premium?

It may lower your premium, depending on your policy and carrier. However, a higher deductible means your business would pay more out of pocket for a covered loss. Consider the potential savings alongside the amount your business could afford to pay after a claim.

When should I start preparing for my commercial insurance renewal?

Consider starting about 90 days before renewal. That gives you time to review your business information, discuss coverage needs with your agent, and explore other options if needed.

Should I switch insurance companies if my commercial insurance rate goes up?

Not necessarily. First, ask why the premium increased and compare your renewal with other available options. Make sure you’re comparing similar limits, deductibles, exclusions, and coverage terms before deciding.

What Happens if a Business is Underinsured?

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By: Carlos Chavira, Commercial Lines – Executive

Executive Summary:

If your business insurance doesn’t cover the full cost of a claim, you may have to pay the difference out of pocket. The right coverage depends on your business’s services, property, employees, vehicles, contracts, and potential risks. Reviewing your policy regularly can help you identify coverage gaps before an accident or lawsuit puts your business finances at risk.

Is your business actually covered, or do you just have “enough”? 

The danger of being underinsured isn’t a risk business owners think about until something actually happens. A lawsuit, property damage, or an accident on a job site can quickly turn into an expensive problem when your insurance doesn’t cover the full loss. 

Grimes Insurance Agency has helped West Texas businesses navigate their insurance needs since 1948. And over the years, one thing has proven true: having insurance doesn’t necessarily mean you have enough coverage to protect your business.

So, what happens when your coverage falls short… and what can you do about it?

By the end of this article, you’ll know:

  • What it means to be underinsured
  • What can happen when your coverage isn’t enough
  • How to recognize potential gaps before you need to file a claim

What does it mean for a business to be underinsured?

A business is underinsured when its insurance coverage isn’t enough to handle a loss, damage, lawsuit, or professional claim. You have an insurance policy, but your limits, coverages, or details don’t fully match the risks your business regularly faces. 

The most common reason? Business owners often want the minimum coverage for the lowest price. It’s a conversation we have with nearly every client, and we get it. In fact, 77% of small businesses are underinsured!

Pie chart aligned to the left, demonstrating 23% of small businesses are insured, and 77% are underinsured.

Running a business isn’t cheap, and trying to insure it isn’t always either. But choosing coverage based only on price can leave your business exposed to much larger expenses later. 

What are the financial consequences of your business being underinsured?

When a claim exceeds your policy limits, your business is responsible for paying the difference. Depending on the size of the loss, that expense could affect more than your insurance loss history. The cost of underinsurance could:

  • Deplete your business savings
  • Impact your company cash flow
  • Affect your current operations

The bottom line: being underinsured is expensive.

An Unfortunate (And Expensive) Underinsured Example

We’ve had many clients come to us for direction after encountering an underinsured accident.

For example, a contractor was once hired to install an AC in a strip mall center. While using a crane to lift it toward the roof, the unit slipped and crashed into the stores next door. As you can imagine, the total cost of the damage exceeded their insurance limits, forcing the contractor to pay the remainder of the bill out-of-pocket.

While it’s a story no business owner wants to imagine themselves in, it’s an eye-opening reminder to ensure your coverage limits are sufficient before a claim occurs.

Fortunately, you don’t have to wait for a claim to discover a coverage gap. Grimes Insurance Agency can help you anticipate where your current policy may fall short. Feel free to call our office to discuss your business’ coverage with our commercial team.

How do you know if your business is underinsured?

Insurance gaps can develop when your coverage no longer matches the way your business operates. Even if you have an active policy, changes to your services, revenue, employees, or projects can create risks worth reviewing. 

Some signs your business might be experiencing insurance gaps include:

  • Your policy lists inaccurate or outdated information
  • You’ve added new or different services
  • Your business has changed in size (either grown bigger or smaller)
  • You rely on uninsured subcontractors
  • You’ve purchased new equipment or company vehicles

Text reads "Review your policy when there are..." with 4 elements below: changes in services, changes in revenue, changes in employees, and changes in projects.

These are just a few examples of how a policy can fall short of a business’ actual needs. For a closer look at each issue, read our guide to 4 Common Contractor Insurance Gaps to learn how you can avoid being underinsured. 

How can you avoid being underinsured?

You can’t predict every accident or lawsuit, but you can take practical steps to make sure your insurance doesn’t fall behind.

Start your renewal review early

Waiting until the last minute can limit your opportunity to compare options and ask questions. 

We recommend contacting your insurance agent around 60 days before your renewal date. That gives you time to review your current policy, discuss changes to your business, explore your options, and make informed decisions before coverage renews. 

Review your coverage at least once a year

Tattoo it on your forehead. Make a reminder on your phone. Whatever you have to do to remember: don’t wait to think about your coverage! We’ve seen it one too many times where clients forget to update their coverage until it’s too late. 

Image of a calendar aligned to the left, with a date square circled. Text aligned to the right reading: review your coverage every year at renewal.

We recommend reviewing your coverage with an agent every year at renewal. A regular review gives you an opportunity to discuss your business’s operations, property, revenue, employees, vehicles, contracts, and plans. It can also help you identify changes that should be reported to your insurer. 

Tell your agent when your business changes

Has your business grown, taken on larger jobs, increased revenue, or made other meaningful changes? If so, bring them up to your insurance agent when they happen. 

Even if the change seems minor, it may affect how your business’s risk is assessed or what coverage is appropriate. More importantly, it can help prevent surprises when you need to make a claim. 

We’ve had many clients expand their business to include multiple trades. For instance, a plumbing company wanted to start offering HVAC services. Because the client shared this with their agent, our commercial team modified their existing policy before they took on an uncovered job. 

A quick chat with your agent can make a world of difference for your insurance policy. If you’re getting ready to discuss your business’s coverage, feel free to call our office anytime to connect with a Grimes agent.

Check your insurance requirements and exclusions

While the Texas Department of Insurance (TDI) provides a standard for how businesses should be insured, our state doesn’t require most businesses to carry workers’ compensation or general liability insurance to operate. However, your industry, contracts, and business activities may determine what coverage you need or are required to carry. 

For example, a local roofing company was paying around $6,000 a year for a policy that excluded hot work, which is a common type of labor for roofers. After the crew accidentally started a fire that caused roughly $89,000 in damage (ouch!), the exclusion left the business owner responsible for the uncovered loss.

Before assuming your current policy is sufficient, check a few things:

  • Does your landlord, lender, client, or project agreement require specific coverage or limits?
  • Does the business you run have specific insurance or bonding requirements?
  • Does your policy currently exclude any necessary coverages your profession needs?
  • Do your business vehicles have the appropriate insurance coverage and meet applicable requirements?
  • Are your employees adequately covered and taken care of by your insurance policy?

Meeting a legal or contractual requirement doesn’t automatically mean you have enough coverage for every potential loss. Review your policy limits alongside your actual business risks, and talk with your insurance agent if you’re unsure whether your coverage is adequate. 

Compare more than just the premium

A lower premium may be appealing, but it doesn’t tell you everything you need to know about a policy.

When comparing insurance options, look at the coverage provided, limits, exclusions, deductibles, and any requirements that apply to your business. Two policies with similar prices may not provide the same protection. 

Are you having trouble deciding between policy quotes? Read our Guide to Comparing Contractor Insurance Quotes to learn what to keep in mind for decision time. 

The goal isn’t to buy the most insurance possible, but to understand your risks and choose coverage that fits your business and budget just right.

Grimes Insurance can help you properly insure your business

Being underinsured can turn an unexpected accident or lawsuit into a significant financial burden. A successful business is bound to change and grow. And it only makes sense that your coverage changes with it. When it doesn’t, that’s when underinsured accidents happen. 

Your insurance should reflect the business you operate today, not just the one you started with. Renewing your coverage regularly, keeping your business details accurate, and asking questions about your policy can help you identify potential gaps before you need to rely on it. 

Not sure whether your business has the right coverage? You don’t have to figure it out alone. Grimes Insurance Agency has helped local businesses review their policies since 1948, and we’re ready to help you do the same. 

You can request a business insurance quote anytime and discuss your policy with an agent. Or, if you’re not quite ready for a quote, read Why West Texas Contractors Trust Grimes to learn how we have your business’ back. 

3 Steps for Filing a Storm Claim in Texas

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By: Becky Wooten, Customer Advisor

Executive Summary:

After a hail or windstorm damages your home, start by documenting any visible damage and arranging an inspection with a reputable, local roofer. Contact your insurance agent promptly to understand your policy, wind and hail deductible, and claim-reporting requirements before deciding how to proceed. If you have a mortgage, verify your lender’s information on your policy and ask about its requirements for handling insurance claim payments. 

Taking these steps can help you understand your options, prepare for the claims process, and avoid preventable delays.

It’s a warm, sunny day in West Texas. The forecast calls for clear skies and no rain in the foreseeable future. Until, all of a sudden, the sky turns dark. Before you know it, your front yard is flooded, and you begin to hear the familiar rhythm of hail on your roof. 

In an area like ours, wind and hailstorms can develop quickly, leaving Lubbock homeowners wondering what to do first. Should you call a roofer? Should you file an insurance claim? How much will your deductible cost? And what happens if your mortgage company is involved in the claim payment?

With so many decisions to make, it’s easy to feel overwhelmed.

Grimes Insurance has been helping West Texas families navigate insurance questions since 1948. We understand how important it is to know what your policy covers, what you may have to pay out of pocket, and what to expect when storm damage occurs.

In this guide, we will:

  • Walk you through 3 steps to take after a hail or windstorm
  • Explain why each one matters
  • Help you prepare for the insurance claims process
  • Explain what to expect when storm damage occurs

What should I do first after a hail or windstorm?

Short on time? Watch our video summary below:

1. Have a local roofer inspect your roof

After a hail or windstorm, start by documenting any visible damage and arranging an inspection with a reputable local roofer.

You might notice missing shingles, damaged gutters, dents on metal surfaces, or debris around your property. However, some roof damage can be difficult to identify from the ground.

Example images of storm damaged fascia boards, missing shingles, dented metal roofing, damaged gutters, and leftover storm debris.

Keep in mind that while there are general roofing contractors that can complete most of these repairs, not all roofing contractors take on additional construction. You may be referred to a different contractor for some damage repairs. 

If your home is in immediate need of repair, including gaping holes, active leaks, etc., call your roofer to ask how they recommend preventing further damage. Please hear us: DO NOT climb onto your roof to inspect it yourself. Roofs can be slippery, unstable, or otherwise dangerous after a storm. So, it’s best to leave that job to the professionals.

How do I look for a reputable roofer?

Following a major storm, you may see roofing contractors from outside the area going door to door. Before hiring someone, take time to check their reputation, references, proof of insurance, and experience with similar projects.

A reputable roofer should be able to:

  • Inspect your roof for visible storm damage
  • Document damage with photos and other evidence
  • Provide an estimate for necessary repairs
  • Explain what work may be needed
  • Help you understand the repair process

A local company may also be easier to reach if questions or problems come up after the work is completed. 

If you’re looking for a roofing contractor in the Lubbock area, ask for recommendations and compare qualified companies before making a decision. Many of our local clients have successfully worked with West Texas Commercial Roofing and Hartman Roofing Lubbock.

Remember that a roofer’s inspection and estimate are not the same as an insurance coverage decision. Your insurer determines coverage under your policy, and the amount it pays may differ from a contractor’s estimate.

If possible, obtain documentation and an estimate to help you understand the potential repair costs. However, don’t delay contacting your insurance agent while waiting for an inspection. Your policy may include specific claim-reporting requirements or deadlines.

2. Call your insurance agent before you file a claim

Before deciding how to proceed with a claim, contact your insurance agent or carrier to discuss your coverage, deductible, and reporting requirements.

A storm can cause thousands of dollars in damage, but the amount you may receive from an insurance claim depends on your policy, the covered damage, your deductible, and other applicable terms.

One detail that can catch homeowners off guard is a separate wind or hail deductible.

How much is a wind and hail deductible in Texas?

In West Texas, wind and hail deductibles are calculated as a percentage of your home’s insured dwelling (also known as Coverage A) limit, rather than a fixed dollar amount. This is common in places with a higher risk of hail, wind, tornadoes, and other storm events. In our area, that percentage is commonly 2%. 

For example, if your policy has a $300,000 dwelling limit and a 2% wind and hail deductible, your deductible (aka, what you’re required to pay up to) would be $6,000.

Example equation from above. $300,000 home multiplied by a 2% wind and hail deductible equals possible $6,000 out-of-pocket costs.While a 2% deductible is the most common across carriers, some policies can go up to 5%. Let’s look at a few different examples of dwelling limits:

Home value 2% wind and hail deductible 3% wind and hail deductible 5% wind and hail deductible 
$250,000 $5,000 $7,500 $12,500
$300,000 $6,000 $9,000 $15,000
$400,000 $8,000 $12,000 $20,000

**These are examples, not actual quotes or a statement of what every Texas homeowner pays.

Your deductible is determined by the terms of your individual policy, including the value used to calculate it. A percentage-based deductible can mean paying several thousand dollars out of pocket before insurance contributes to a covered loss. 

Should I File an Insurance Claim for Storm Damage?

Deciding to file a claim depends on your circumstances. 

Before making a decision, you should consider:

  • The estimated cost of repairs
  • Your policy’s applicable deductible
  • Whether the damage appears to be covered
  • Any policy requirements or deadlines for reporting the damage
  • The potential out-of-pocket cost

At Grimes Insurance, we understand how stressful storm damage can be. 

For example, imagine a hailstorm leaves $6000 in damage when your deductible is $5000. If your claim is approved, the insurer would pay about $1000, and your premium could rise at renewal by more than that. Some homeowners still file, and that’s a reasonable choice, especially if they’re worried the damage could turn out to be worse than it looks. 

But we also know how stressful it is to pay more out of pocket than you expected, or to run into a surprise in your coverage when you can least afford it. That’s why we encourage homeowners to learn their deductible before a storm hits, so whether you file a claim or decide not to, you’re making an informed choice. 

The important thing is to understand your coverage and potential out-of-pocket cost before making a decision.

Interested in learning more about what the claims process looks like? Read How Does Grimes Insurance Agency Handle Claims? to understand how your insurance agent will walk you through each step.

3. Verify your mortgage information

If you have a mortgage on your home, check that your mortgage company’s name and information are correct on your homeowners insurance policy.

Why does this matter?

Because all mortgage companies have a certain process they must follow for your claim to be handled… and it’s important to understand it. 

Your mortgage lender has a financial interest in your property and may be listed on an insurance claim check. Depending on the circumstance, the lender may need to endorse the check, review repair information, or release funds in stages. 

If the information on your policy is outdated or incorrect, correcting it later can mean a delayed claims process or payment. This is particularly important if you’ve refinanced your home or changed lenders.

Before you need to file a claim:

  1. Review your current insurance declarations page.
  2. Check the mortgage company’s name and listed information.
  3. Contact your insurance agent if anything appears outdated or incorrect.
  4. Ask your agent what documentation is needed to update the policy.

Taking a few minutes to verify your mortgage information now may help prevent an insurance headache later.

What Should I Do When My Insurance Claim Check Arrives?

Once your insurance claim check does arrive, do not endorse or deposit it until you’ve confirmed your mortgage company’s requirements for handling it.

The process for handling an insurance claim check can vary by lender. Your mortgage company may have specific instructions for endorsing, depositing, or releasing funds for repairs. Some lenders may also require repair estimates, contractor information, photographs, inspections, or other documentation. 

If you sign it before following their process, it can create major issues.

Text overlay reading "DO NOT endorse or deposit your insurance claim check until you've confirmed with your mortgage lender" in front of a background image of a bank check.

Before signing or depositing the check:

  1. Review the payee (who is named on the payment)
  2. Contact your mortgage company and ask what steps they require
  3. Ask about documentation they require
  4. Follow the lender’s instructions

Don’t assume the process is the same for every lender, as they can vary. Confirm the requirements with your mortgage company first.

What Should I Do Next After a Texas Storm?

A storm can leave you wondering whether you have damage, what your insurance will cover, and how much you’ll have to pay yourself.

Start by documenting the damage, getting a reputable local inspection, understanding your deductible, and confirming your mortgage information.

If you need help understanding your policy or have questions about your coverage, Grimes Insurance has been helping West Texas families since 1948. We can help you understand your policy and walk through your options before you decide how to proceed.

To talk with an agent about how your policy may approach a storm claim, Grimes Insurance is available to you. Feel free to call our office anytime to connect with an agent and discuss your coverage. Or, read Home Insurance vs. Home Warranty: What’s the Difference? so you can tell them apart when a storm comes.

Frequently Asked Questions About Hail and Wind Damage in Texas

What’s the first thing to do after a hailstorm in Texas?

Start by having a reputable local roofer inspect your property for storm damage and document what they find. Then review your insurance coverage and deductible before deciding how to proceed with a claim.

Should I call my insurance company before filing a claim?

It’s a good idea to talk with your insurance agent or carrier before filing so you understand your coverage, deductible, and claims process.

Why is my hail or wind deductible so high?

Some homeowners insurance policies use a separate wind/hail deductible that is calculated as a percentage of the home’s insured value. The exact amount depends on your policy.

For example, a 2% deductible on a $300,000 insured home would be $6,000.

Can I cash my insurance claim check myself?

Not necessarily. If you have a mortgage, your lender may be included on the claim payment and may have specific requirements for handling the funds. Contact your mortgage company before endorsing the check.

Should I file an insurance claim if my roof has storm damage?

It depends on your policy, deductible, the extent of the damage, and your circumstances. Talk with your insurance agent or carrier and review your policy before deciding how to proceed.

What Lubbock Home Insurance Covers (And What it Doesn’t)

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By: Niki Saavedra, Director of Operations

Executive Summary:

A standard homeowners insurance policy typically covers your home, belongings, liability, and additional living expenses after certain covered losses. It generally does not cover flooding, gradual damage, normal wear and tear, or certain other exclusions.

For Lubbock and South Plains homeowners, wind and hail deductibles, roof coverage, and water-related losses deserve particular attention.

Do you know exactly what your home insurance policy covers, or what could leave you paying thousands out of pocket?

If a hailstorm damages your roof, a pipe bursts, or a sewer backs up into your home, would your policy pay for the damage? The answer depends on what caused the loss, what your policy covers, and which exclusions or endorsements apply. 

At Grimes Insurance Agency, we’ve reviewed home insurance policies for West Texas homeowners since 1948. For homeowners in Lubbock and the surrounding South Plains communities, understanding those details can be especially important when severe weather or other unexpected losses put your coverage to the test.

By the end of this article, you will know:

  • What a standard home insurance policy covers
  • What a home insurance policy excludes
  • Which protections West Texas homeowners should consider 

What Does Home Insurance Typically Cover?

A standard homeowners policy, such as an HO-3, typically provides several types of protection. Let’s break down what they typically include:

Home structure protection

Dwelling coverage helps pay to repair or rebuild your home when it is damaged by a covered peril. Depending on the policy, covered events can include:

  • Fire
  • Lightning
  • Windstorm
  • Hail
  • Vandalism
  • Theft

Personal property protection

In the event of a covered peril, personal property coverage can protect belongings inside your home, such as:

  • Furniture
  • Clothing
  • Appliances
  • Electronics

High-value belongings, like jewelry, firearms, art, and collectibles, may have special limits, so a standard policy might not be enough. Most valuable items require additional policy coverage, like scheduling your valuables under an endorsement. Be sure to check your policy thoroughly to ensure your high-value items remain protected. 

Example images of high-value items homeowners should schedule. From left to right: expensive furs or clothing items, precious jewelry or stones, expensive electronics or devices, and gold and silverware.

Liability protection

If someone were to become injured on your property and you’re legally responsible, liability coverage can help pay for legal defense costs, medical bills, and judgments. 

Standard policies typically include liability coverage of $100,000 to $300,000. Higher limits or a personal umbrella policy may make sense for homeowners with significant assets. 

Additional living expenses coverage

If a covered loss makes your home temporarily uninhabitable, additional living expenses coverage becomes extremely helpful. This coverage can help pay for temporary housing, meals, and other qualifying costs while repairs are completed. Generally, this coverage is often capped at 20 to 30 percent of your dwelling limit.

What does home insurance typically NOT cover?

Some of the biggest coverage surprises involve losses that require separate insurance or an endorsement. 

Does home insurance cover flooding in Lubbock?

Generally, a standard homeowners policy excludes outside flooding from a natural event. Flood damage requires a separate policy through the National Flood Insurance Program (NFIP) or a private carrier to be covered. 

In most low flood risk areas like West Texas, understanding flood insurance doesn’t seem necessary. However, don’t be quick to dismiss it. In fact, 29% of NFIP flood claims come from areas without a flood risk. 

It’s important to distinguish flooding from other types of water damage. For example, a sudden water damage claim from a burst kitchen pipe or sewer backup is treated differently than water entering your home from the outside. 

Side-by-side image example. Image of a burst pipe with hole in the drywall and water pooling on the floor is aligned to the left. An image of an outdoor flood sitting around a house is aligned to the right.

Does Home Insurance Cover Sewer Backup?

A sewer backup incident is a major (and literal) stinkfest and can cause thousands of dollars in damage to finished spaces and belongings. However, water backup coverage is only available through a policy endorsement or rider.

You should consider adding sewer backup coverage to your homeowners policy if:

  • You live in an older home with aging septic and pipes
  • You have a sump pump and/or a basement
  • You have nearby trees with deep roots that could affect your plumbing system

Does Home Insurance Cover a Home-Based Business?

A standard homeowners policy provides very little to no coverage for a home-based business, typically offering only $2,500 of coverage for business equipment. Without additional coverage or endorsements, items like your business inventory, liability, or separate work areas could be at risk. 

If you’re looking to insure your business, Grimes can help you find the right options. Feel free to call our office to discuss your coverage with our commercial insurance team.

Does home insurance cover gradual damage claims?

Standard home policies only cover sudden, accidental damage from specific perils. Because of this, damage that develops over time is excluded. This includes issues like:

  • Slow leaks
  • Foundation settling
  • Mold growth
  • Pest damage
  • Normal wear-and-tear

What coverage gaps should Lubbock homeowners watch for?

For homeowners in Lubbock and across the South Plains, wind and hail deductibles and roof settlement deserve particular attention.

Wind and hail deductibles

Your policy may include a separate wind and hail deductible that applies to covered storm damage.

For example, if your $300,000 home has a 3% wind and hail deductible, you could have $9,000 in out-of-pocket costs before your insurance coverage applies. And that’s not a situation anyone wants to be in.

Example equation from above. $300,000 home multiplied by a 3% wind and hail deductible equals possible $9,000 out-of-pocket costs.

We’ve seen this play out firsthand. In our experience, some carriers will lower a policy’s wind and hail deductible during storm season, but only if the client calls in to request the change first. 

When a storm is actually in the forecast, clients often call in a panic trying to make that switch, only to learn the change won’t take effect for 24 hours. They’re stuck at the higher deductible right when they need the lower one most.

Knowing your deductible ahead of time, rather than scrambling the night before a storm, can make a real difference in what you pay out of pocket. 

Replacement Cost vs. Market Value

With the high amount of hail-related roof claims we see in our area, you should also find out how much your roof would be settled for after a covered loss. 

Replacement cost coverage can help pay the cost to replace a damaged roof, subject to the policy terms and deductible. Actual cash value accounts for depreciation.

For example, if replacing a roof costs $12,000, depreciation could significantly reduce the amount paid under an actual cash value settlement. 

Before you file your next roof claim, ask your agent how your roof is covered to avoid any costly surprises. 

How can you find coverage gaps before a claim?

Before your next renewal, ask these three questions:

  1. Does my dwelling coverage reflect my home’s current replacement cost?
  2. Do I have sewer backup coverage, and does my home need it?
  3. What kind of wind and hail deductible does my home have? Should I lower it during hail season?
  4. Would my roof claim be settled at replacement cost or actual cash value?

Discussing these questions with your insurance agent can help you identify important coverage gaps before a storm, water damage, or another claim occurs. 

Grimes can help you review your homeowners policy

A general homeowners policy protects your home’s structure and belongings, covers liability, and provides additional living expenses if your home becomes uninhabitable. However, knowing what your policy excludes can be just as important as knowing what it covers. 

Claims from flood, water backup, and gradual issues are not protected by a standard policy and require additional coverage or endorsements. For Lubbock homeowners, understanding your wind and hail deductible, roof settlement, water coverage, and other exclusions can help prevent expensive surprises. 

At Grimes Insurance Agency, we’ve helped West Texans understand their coverage since 1948. If you own a home in Lubbock or the surrounding South Plains, feel free to call our office and connect with an agent. We can help you review your policy, understand what it protects, and find the right coverage fit for your home.

Or, if you’re curious about what it takes to get the right protection, read What to Expect When Shopping for Home Insurance With Grimes. That way, you can learn how our process works before you’re ready to make a decision.  

How Much Dwelling Coverage Do You Need in Lubbock?

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By: Niki Saavedra, Director of Operations

Executive Summary:

Your home’s dwelling coverage should match your home’s replacement (or rebuild) value. In Lubbock and West Texas, local construction costs can run roughly $145 to $250 per square foot. But your actual replacement cost depends on your home’s size, construction quality, materials, features, labor costs, and other property-specific factors.

The most reliable way to determine whether your dwelling coverage is sufficient is to review a replacement cost estimate and compare it with your current policy limit.

If your home were destroyed tomorrow, would your insurance coverage be enough to rebuild it?

Construction costs, labor, and materials change over time, meaning the number on your policy could be below what it would cost to rebuild your home today. If you’re underinsured, you could be left paying the difference out of pocket.

At Grimes Insurance Agency, we’ve helped West Texas homeowners evaluate their insurance coverage since 1948. Our experience working with homeowners in the area has shown us why it’s important to review dwelling coverage as construction costs and homes themselves change over time.

In this article, we’ll explain: 

  • What dwelling coverage includes
  • How to estimate the amount you need
  • What can happen if you’re underinsured
  • Which factors West Texas homeowners should consider when reviewing their policies

What is Dwelling Coverage in Home Insurance?

Dwelling coverage (also known as Coverage A) is the portion of your homeowners insurance policy that pays to repair or rebuild your home’s physical structure after a covered loss. 

It generally covers items such as your home’s:

  • Walls
  • Roof
  • Foundation
  • Permanently attached systems (Electrical, plumbing, and HVAC)

Depending on your policy, covered causes of loss may include fire, hail, windstorm, and vandalism. Coverage depends on the specific policy, including its covered causes of loss, exclusions, deductibles, and endorsements.

It does not generally cover your land, personal belongings, or detached structures (aka, a shed or garage), which may fall under other parts of your homeowners policy.

T-chart illustration listing the items mentioned above that dwelling coverage DOES cover and what it does NOT cover.

One of the biggest misconceptions we see clients have is using market value to determine their dwelling coverage. However, your dwelling coverage should actually reflect what it would cost to rebuild your home’s structure, not what it would sell for.

What is the difference between market value and replacement cost?

Market value and replacement cost are two completely different numbers. 

  • Market value reflects what someone would pay for your home. 
  • Replacement cost (or rebuild cost) reflects how much it would cost to reconstruct your home after a total loss, based on current labor and material costs. 

For example, a home might have a market value of $300,000 but cost $400,000 to rebuild. In that scenario, insuring the home based on its market value could leave a $100,000 gap between the dwelling coverage limit and the estimated reconstruction cost. 

2 houses. House on the left is titled "market value" with a For Sale sign that reads "$300,000". The house on the right is titled "replacement cost" with a construction sign that reads "Construction in progress: $400,000".

Keep in mind that your actual replacement cost depends on your home’s characteristics and local construction prices. How much you purchased, or how much you can sell your house for, is not a reliable substitute for a replacement cost estimate. 

How do you calculate the right dwelling coverage amount?

Dwelling cost should be based on your replacement or rebuild value, so your starting point should be finding that estimate. Estimates vary based on construction companies, carriers, and your home details. However, there are a handful of ways to help you understand what your home may cost to rebuild.

1. Use square footage for a rough rebuilding estimate

You can multiply your home’s square footage by a local construction-cost-per-square-foot figure to get a preliminary idea of what rebuilding could cost.

Graphic includes the equation for finding a rough rebuilding estimate. "Home square footage multiplied by local construction costs (per sq. ft.) equals rebuilding cost estimate".

In the Lubbock and West Texas market, custom construction costs have been estimated at $145 to $240 per square foot for the structure, excluding land. Higher-end construction with premium finishes and features can cost more. 

Using that range, a 2,000-square-foot home could have a rough construction-cost range of $290,000 to $480,000. 

$145 per sq. ft. $240 per sq. ft.
1,500 sq. ft. home $217,500 $360,000
2,000 sq. ft. home $290,000 $480,000
2,500 sq. ft. home $362,500 $600,000

** These figures are rough examples based on just one set of published ranges. They are not personalized replacement cost estimates or guaranteed reconstruction prices. 

Actual costs can vary significantly based on labor availability, material prices, your home’s architecture, features, debris removal, site conditions, and the specific characteristics of your home.

When estimating, you should use the square-foot calculation as a preliminary check, not as the final number your insurance policy should use.

If you’re unsure of how much local construction costs are in your area, contact your real estate agent or the West Texas Home Builders Association to be pointed in the right direction. 

2. Ask your insurance agent to run a replacement cost estimate

A replacement cost estimate uses information about your home to estimate how much it would cost to rebuild the structure. Insurance carriers may use replacement-cost estimating tools as part of determining an appropriate dwelling coverage limit. 

Depending on the estimator, information required by the carrier may include: 

  • Your home’s square footage
  • Number of stories
  • Type and quality of construction
  • Roof materials and features
  • Interior finishes, cabinetry, and flooring
  • The age and characteristics of the home
  • Local labor and material costs

Two homes with the same square footage can have very different replacement costs. A home with custom cabinetry, specialty windows, and high-end finishes, for example, could cost more to rebuild than a home with standard finishes of the same size.

3. Account for inflation and changes in construction costs

Even if your dwelling coverage and replacement costs were accurate when you purchased your policy, it may no longer reflect current rebuilding costs. 

Labor rates, building materials, and contractor availability can change over time. A coverage limit that made sense several years ago may not be sufficient when you need to rebuild today.

An inflation guard is a policy feature that keeps carriers from increasing the dwelling over a certain amount. For many of our client policies, a 3% guard is the most common. It can help your coverage keep pace with rising costs, but it does not guarantee that your limit will match actual reconstruction expenses.

If your carrier does not offer an inflation guard as part of a policy, you may be able to add one to your home’s coverage as an endorsement. 

Unsure how to do that? Grimes Insurance can help you explore available endorsements and determine which ones might make sense for your situation. Contact our office to connect with an agent to discuss your policy’s possibilities.

The best way to stay ahead of changing construction costs is to review your coverage at renewal and after major changes to your home. 

What happens if your dwelling coverage is too low?

If your dwelling coverage is insufficient, your policy is leaving you underinsured. That can leave you with a financial gap if a covered loss costs more to rebuild than your policy limit or applicable coverage provisions provide.

For example, if your home would cost $400,000 to rebuild but your policy provides only $300,000 in applicable dwelling coverage, you could be responsible for the remaining $100,000.

What is coinsurance?

Some policies include an insurance-to-value (also known as coinsurance) provision that can reduce a claim payment when your coverage falls below the amount required by the policy. 

For example, if your home would cost $400,000 to rebuild, but you only carry $240,000 in coverage, you could face a significant coverage shortfall, depending on the terms of your policy. 

The takeaway? Your dwelling limit should be reviewed against your home’s current estimated replacement cost, not an outdated estimate or its market value.

You should plan to reevaluate your coverage regularly as your home ages, construction costs change, or your property is updated.

What Should West Texas Homeowners Consider When Choosing Dwelling Coverage?

If you live in Lubbock or the South Plains, you already know that West Texas homeowners face specific weather and construction considerations. 

Your dwelling coverage should account for your home’s estimated replacement cost, while your policy’s covered perils, deductibles, exclusions, and endorsements determine how a covered loss may be handled.

How do hail and wind affect your dwelling coverage needs?

With nearly 3 to 5 hail events a year, hail and wind can damage multiple parts of your home at once, including the roof, siding, gutters, windows, and HVAC equipment. 

Your dwelling limit should reflect the estimated cost to rebuild, while your policy’s covered perils, deductibles, and exclusions determine how a storm loss is handled. 

We recommend reviewing both your dwelling limit and wind and hail deductibles to understand your potential out-of-pocket costs. 

How often should you review your dwelling coverage?

We recommend clients review their dwelling coverage at every policy renewal and after significant home improvements. 

A review is particularly important if:

  • You haven’t updated your replacement cost estimate in several years
  • You’ve remodeled spaces in your home
  • You’ve expanded your home’s square footage
  • You’ve upgraded your roof, windows, flooring, or other major features
  • You’re unsure about inflation protection or additional replacement cost coverage

The goal is to identify potential coverage gaps before a loss occurs, rather than discovering them after you need to rebuild.

During this time, we recommend leaning on your insurance agents to help answer any questions or confusion you have about your homeowners policy. 

How can Grimes Insurance Agency help you review your dwelling coverage?

The right dwelling coverage is based on what it would cost to rebuild your home today. Your market value, purchase price, and existing mortgage balance won’t necessarily tell you whether your insurance limit is sufficient. 

A replacement cost estimate, a review of your policy’s coverage endorsements, and a discussion of your deductible with an agent can help you understand your financial exposure before a loss occurs. 

At Grimes Insurance Agency, we’ve helped West Texas homeowners evaluate their insurance needs since 1948. We understand that choosing a dwelling coverage limit involves more than selecting a number and moving on. 

We take into consideration your home’s characteristics, estimated replacement cost, current limits, and relevant policy provisions. We also represent multiple insurance carriers, allowing us to discuss available coverage options and compare which policies make sense for your needs. 

If you haven’t reviewed your dwelling coverage recently, contact our office to review your policy with an agent. Or, if you’re not quite ready for a review, read What to Expect When Shopping for Home Insurance with Grimes to learn about how the rest of your homeowners policy fits together, and how the agency’s process works. 

Frequently Asked Questions

Is dwelling coverage based on the purchase price of my home?

No. Dwelling coverage should generally reflect the estimated cost to rebuild the home’s structure at current prices. Your purchase price includes factors such as land value and market demand that don’t directly determine reconstruction cost.

How do I know if I have enough dwelling coverage?

Ask your insurance agent to run a replacement cost estimate based on your home’s actual features and current local construction costs. Compare that estimate with your dwelling coverage limit, and review whether your policy includes additional replacement cost benefits or insurance-to-value requirements.

How often should I update my dwelling coverage?

Review your coverage at every renewal and after significant renovations or additions. Changes in construction costs can also make an updated estimate worthwhile, even if you haven’t made changes to the property.

Does homeowners insurance cover the full cost of rebuilding?

Not necessarily. Your policy’s dwelling limit, covered causes of loss, deductibles, exclusions, and any additional replacement cost provisions affect how much the insurer will pay. Review your policy to understand whether additional coverage is available if reconstruction costs exceed your stated limit.

Does dwelling coverage include my garage or shed?

An attached garage may be included as part of your dwelling, while a detached garage or shed is generally covered under a separate other-structures provision. Check your policy to confirm how your specific structures are insured.

How Does Grimes Compare Insurance Options?

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By: Hayley Rodriguez, Personal Lines – Sales Executive

Let’s face it. Comparing insurance quotes is not an easy feat. Between the policy language, similar pricing, and an endless number of options, it’s enough to go cross-eyed. 

Choosing a policy involves more than price; it also involves finding the right kind and amount of coverage. But how do you look for both? What starts as a simple search can easily become a spiral of questions and confusion. 

Working with a diverse network of 100+ insurance carriers, Grimes Insurance understands the struggle. For over 78 years, we have helped West Texans take the guesswork out and find the best coverage for them and their families! 

By the end of this article, you will understand what our carrier comparison process looks like, including: 

  • What we look for when comparing
  • How we narrow your insurance options
  • How our comparison helps you find the right coverage

How does Grimes compare insurance options?

Grimes Insurance follows a process that starts with a broad group of carriers and gradually narrows the options based on your specific situation. Let’s break it down.

Step 1: Grimes gets initial quotes from multiple insurance carriers

Once an agent receives your quote form, Grimes uses rating software to pull initial quotes across our network of carriers all at once. 

This step is all about scouting out your options and seeing what’s available. The initial quotes give your Grimes agent a starting point for determining which carriers are worth looking at more closely.

How does Grimes shop across carriers?

Grimes Insurance is an independent insurance agency. Unlike a captive insurance agent who works for a specific insurance company (like Progressive, GEICO, or Nationwide), our agents have the ability to shop with multiple carriers at once. 

How does that work? Let us explain:

Independent insurance agent Captive insurance agent
  • Represent multiple insurance carriers rather than a single company. 
  • Not employees of any one insurer, but work on behalf of their clients.
  • Represent a specific insurance company. 
  • Employed by a single carrier and offer coverage only with their company.

Independent agents aren’t better than captive agents, or vice versa. However, independent agents can help you search more policy options at once. Deciding which type of agent you work with boils down to the options you need. 

Still curious about the difference? Read How Do Independent Insurance Agencies Work? to learn how independent and captive agents compare in the search for insurance.

Step 2: Grimes matches carriers to your specific situation and information

Once the initial quotes are available, the next question is: which of these carriers actually makes sense for you?

Insurance is all about making it personal AND specific. We know that coverage isn’t one-size-fits-all, which is why we take the time to consider all factors that can affect your situation. 

What information is important for comparing insurance options?

Depending on what you’re looking to insure, the information your agent will need from you can vary. Building out an insurance quote involves both information about what you’re insuring (your home, vehicle, etc.) and personal information specific to you. 

Some of these details include:

Personal information Home details Auto details
Full name Roof age and condition Annual mileage
Date of birth House and construction type Accident history
Gender Square footage Driver training and history
Marital status Property address Vehicle identification number
Basic contact information Occupancy details Vehicle make, model, and year
Driver’s license number Recent renovations or updates Primary vehicle use

Prior to this step in the process, you will have already shared these details with your agent or included them when you requested a quote.

Keep in mind that at this stage, reports may not have been fully run, and some details may still need to be verified. Because of that, the initial premium isn’t necessarily what you’ll ultimately pay.

Once your information is confirmed, the price can change by hundreds or even thousands of dollars. 

Still curious about what your personal information can say about you and your policy? Read Grimes’ Approach to Personalized Insurance to learn how certain details help determine your coverage options.

The goal is to identify carriers that are actually a fit—not just carriers that happen to return a low number.

Step 3: Grimes narrows the options and fully works the strongest carriers

After the initial comparison and applied information, your list of carriers begins to narrow down. Typically, the broad list of carrier options becomes a smaller list of three companies your agent finds worth considering.

This is where the process goes beyond simply looking at prices.

Your Grimes agent fully builds out the strongest options using your verified information so the coverage, price, and carrier fit can be compared more accurately.

That means looking at more than the premium. Our agents consider policy details such as:

  • Coverage limits and exclusions
  • Deductibles
  • Available coverage endorsements
  • Available discounts
  • Policy and carrier requirements
  • Rating information
  • Underwriting guidelines

We become coverage detectives, if you will.

This part of the process matters because two policies can have very different coverage… even if their premiums look similar. 

A Tale of Two Policies: An Example of Insuring an Older Home

Let’s say you’re purchasing a 1970s home and looking to insure it. You receive two online quotes: Policy A and Policy B. However, their premium amounts are nearly identical, and you’re stumped on deciding. 

However, as you compare further, you realize only Policy A offers hidden water coverage, which is a major endorsement to have for an older home. (Nice catch!)

Image compares two policies: Policy A and Policy B. Policy A includes: Matching siding coverage, 2% wind and hail deductible, and Hidden water coverage. Policy B include: Matching siding coverage, 2% wind and hail deductible, and NO Hidden water coverage.

Unfortunately, not all homeowners make the same catch before deciding on the wrong policy. Working with a Grimes agent to spot those coverage gaps for you can make all the difference. 

A real comparison means comparing policies that are built around comparable coverage, not simply comparing how much they’ll cost. From the strongest three options, one quote is fully built out as the recommendation your agent will present you with.

Step 4: Grimes accounts for underwriting and keeps a backup option

Even after a quote has been fully worked, the process isn’t necessarily over.

What is underwriting?

Underwriting is the process insurers use to evaluate your personal risk, determining whether your property, vehicle, business, or item meets their guidelines. This process is happening behind the scenes and can change the picture of your policy.

This review might uncover missing documentation, property issues, or other information that wasn’t reflected in the initial quote. 

Sometimes, underwriting might come back the night before closing on a home policy asking for additional documentation. In some cases, the carrier may decline to write the property altogether. 

That’s exactly why Grimes Insurance agents keep a backup option available, even after the search.

If the first choice falls through, there’s already another viable option instead of starting the insurance shopping process again under time pressure. 

Step 5: Grimes presents you with options

The time has come, and it’s time for you to choose! But don’t worry, we’re still here to help you.

What does Grimes actually hand you after comparing insurance options?

Rest assured, you won’t be left with a pile of numbers to interpret on your own. 

Your Grimes agent will give you a fully worked recommendation based on your specific situation, explain why that option was selected, and keep a backup option on hand if needed. 

Our goal isn’t to overwhelm you with choices. It’s to do the comparison work for you and explain why the recommended policy makes sense. 

If at any point you’re unsure or want to consider different options, your agent is prepared to help you break down your coverage and go back to the drawing board. 

What does a real insurance comparison look like?

One family came to Grimes after their existing insurer gave them eight days to complete a long list of repairs– or they’d risk losing their homeowners’ coverage.

They weren’t just shopping for a lower price, but looking for someone who would be straightforward with them about what was actually going on with their property.

Rather than simply quoting another carrier, their new agent looked more closely at the issues identified by the existing insurer. Two in particular:

  • Removing a tree with overhanging limbs
  • Resolving an in-progress renovation to their home

Two example images of an in-progress home renovation aligned to the left. Aligned to the right, an example image of overhanging trees outside of a home.

Their Grimes agent verified the issues and connected the family directly with a contractor who could address them. 

In the end, the policy that ultimately worked increased their premium by roughly $600 across home and auto. Yet, they chose it anyway. 

“But now they’re paying more! Why would they choose that option?”

Because Grimes Insurance helped them understand exactly what they were getting, why the policy cost more, and why it made sense for their situation. 

That’s what a meaningful insurance comparison should provide: clarity about what you’re paying for, not just a list of numbers. 

How does Grimes make the insurance comparison easier?

There’s more to comparing insurance than collecting prices and making guesses. It’s about determining which policy and carrier make sense for you and explaining that recommendation clearly. 

Grimes Insurance starts with a broad group of carriers, verifies the information, narrows the options, and presents you with a recommendation that makes sense for you. It’s all part of the process to find you the best fit for coverage. 

If you have questions about how carrier comparison fits into requesting a quote, read about the Insurance Quote Process at Grimes Insurance Agency and learn what else you can expect. And when you’re ready to compare your current coverage with other options, request an online quote. Since 1948, Grimes Insurance has been ready to help you understand the differences and determine what makes sense for your home, vehicles, and situation.

Frequently Asked Questions

How many insurance carriers does Grimes compare?

Grimes initially pulls quotes from roughly a dozen-plus carriers, then typically narrows those options to about three carriers worth fully working based on your specific situation.

Why can my insurance quote change after I submit my information?

Initial quotes may be based on information that hasn’t been fully verified. Once reports, property details, claims history, or other information are reviewed, the premium or carrier eligibility can change.

Why doesn’t Grimes just recommend the cheapest insurance quote?

Because the lowest premium doesn’t necessarily represent the same coverage or the best carrier fit. Grimes considers the policy, coverage, property, vehicles, carrier requirements, and underwriting in addition to price.

Why does Grimes keep a backup insurance option?

Underwriting can change the outcome even after a quote has been fully worked. Keeping a backup option available means there’s another viable path if the primary carrier requests something unexpected or ultimately declines the property.

Insured vs. Uninsured vs. Underinsured: What’s the Difference?

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By: Hayley Rodriguez, Personal Lines – Sales Executive

Executive Summary

Having auto insurance doesn’t always mean you’re fully protected. An insured driver has coverage, an uninsured driver has none, and an underinsured driver doesn’t have enough to cover the full cost of an accident. 

You could have insurance and still be financially responsible if another driver doesn’t have enough coverage. That’s where uninsured/underinsured motorist (UM/UIM) coverage can help protect you from the resulting financial gap.

You have auto insurance. You pay your monthly premium. You should be protected in an accident, right? 

Unfortunately, not always. Having insurance doesn’t always mean having enough insurance. If the driver who causes an accident has no insurance or doesn’t have enough coverage to pay for the damage they cause, you could be left dealing with the difference. And trying to understand where your coverage falls is an uncomfortable place to be in. 

At Grimes Insurance Agency, we’ve helped West Texas drivers understand their auto insurance coverage since 1948. We believe policyholders should feel educated and confident about what their insurance actually protects.

In this article, we’ll break down:

  • What it means to be insured, uninsured, or underinsured
  • How uninsured/underinsured motorist coverage can help
  • What happens if you’re involved in an accident with an uninsured or underinsured driver
  • What to look for when reviewing your own auto insurance policy

What does it mean to be insured, uninsured, or underinsured?

The simplest way to understand the difference:

Situation What it means
Insured The driver has an active auto insurance policy.
Uninsured The driver has no active auto insurance.
Underinsured The driver has insurance, but not enough to cover the full cost of the accident.

The common thread all three terms have in common is liability insurance. 

What is liability insurance?

Liability coverage is what helps pay for injuries or property damage you cause to someone else in an accident, up to your policy limits. 

Most states require drivers to carry a minimum amount of liability insurance. In Texas, minimum liability limits are written as 30/60/25. This includes:

  • $30,000 per person for bodily injury
  • $60,000 per accident for bodily injury
  • $25,000 per accident for property damage

However, keep in mind that carrying the legal minimum and carrying enough coverage for your situation are two different things. That’s where the difference between being insured and being adequately insured becomes important. Let’s break down what these coverage levels can look like.

What does it mean to be an insured driver in Texas?

Being insured means you have an active auto policy that meets at least Texas’ legal requirements.

You can also add other coverages to your policy, such as collision and comprehensive coverage, depending on the protection you want and the requirements of your lender.

It’s important to remember that not all coverages are the same. Read What Does Full Coverage Car Insurance Actually Include? to learn which coverages you should consider adding to your policy.

What does it mean to be an uninsured driver?

An uninsured driver is someone who doesn’t have active auto insurance coverage. 

If an uninsured driver causes an accident, there is no liability insurance policy available to pay for the damages they’re responsible for. In theory, the driver may be personally responsible for those costs. In practice, however, collecting from someone who doesn’t have insurance can be difficult. 

Unfortunately, uninsured drivers aren’t rare. As of 2025, 11.87 percent of Texas drivers are uninsured. If approximately 1 in 8 Texas drivers are uninsured, that’s a real risk drivers should be aware of when considering their own protection.

But there’s another side to this problem: you don’t want to be the uninsured driver. 

Maintaining the required auto insurance coverage is the first step. Letting a policy lapse, cancelling coverage without replacing it, or driving without the required insurance can leave you personally responsible for damages you cause. 

If you’re currently uninsured and looking for coverage, Grimes Insurance Agency can help you search. Call our office to discuss the coverage you need and how you can find it. 

What does it mean to be an underinsured driver?

An underinsured driver is different from an uninsured driver. An uninsured driver has no insurance. An underinsured driver has insurance, but their liability limits aren’t high enough to cover the full cost of an accident they cause. 

Let’s consider an example.

Imagine you’re driving down Marsha Sharp Freeway when another driver merges and collides with your vehicle. The other driver is at fault, and the damage they caused to you and your vehicle is over $80,000. However, the driver is underinsured and only carries the Texas minimum liability limits. Covering only $50,000 of what they owe, you and your insurance company are left to cover the remaining cost.

Equation showing the cost of damage ($80,000) minus what the underinsured driver only pays in minimum liability ($50,000) equals the amount of money still owed for damage ($30,000).

That’s the coverage gap created by an underinsured driver.

And there’s a similar concern when you’re looking at your own policy: you don’t want to discover that your liability limits are too low after you’ve already caused a serious accident. 

How do you know if you’re an underinsured driver?

Being underinsured isn’t always obvious. You may have an active policy, pay your premium every month, and still carry limits that don’t provide as much protection as you need.

Some questions to ask when reviewing your policy include:

  • What are my current liability limits?
  • Would those limits be enough to protect my assets if I caused an accident?
  • Have my financial circumstances changed since I chose my coverage?
  • When was the last time I reviewed my policy?

At Grimes, we typically recommend 50/100/50 coverage as a starting point for many clients, rather than automatically defaulting to Texas’ minimum liability limits. The appropriate coverage can vary depending on your circumstances, which is why reviewing your policy matters. 

Definitions of Texas Liability Limits and Grimes' Liability Limit Standards (50/100/50). Information is included in written section above.

Worried you might be an underinsured driver? Read How to Tell if You’re Underinsured and learn what to keep in mind when purchasing your coverage.

What happens if an uninsured or underinsured driver hits you?

So far, we’ve looked at how to make sure you aren’t uninsured or underinsured.

But what happens when the other driver is?

If an uninsured driver causes an accident, there may be no liability insurance available to compensate you for covered losses. You may have to pursue the driver personally, which can be difficult if they don’t have the financial resources to pay.

If the other driver is underinsured, their insurance may pay up to its applicable limit, but that limit may not be enough to pay for all of your covered losses. 

That’s where uninsured/underinsured motorist (UM/UIM) coverage can help.

UM/UIM coverage is designed to provide financial protection in the case of an accident involving a driver lacking enough coverage or with no coverage at all. It is a separate type of coverage that can be added to your existing auto policy. 

Worried about an uninsured driver hitting you? Watch this video to learn what you can do if you are involved in such an accident:

 

In Texas, auto insurance companies are legally required to offer you UM/UIM coverage. If you decide to opt out of UM/UIM coverage, you are required to reject it in writing when finalizing your policy details.

The important thing to remember is that UM/UIM coverage addresses a different problem than your own liability coverage. Your liability coverage helps protect you when you cause an accident. UM/UIM coverage can help protect you when the at-fault driver doesn’t have enough coverage. 

The difference between what the other driver’s policy pays and what you’re actually owed is the coverage gap. And that gap is where underinsured motorist coverage can be a lifesaver. 

Grimes can help you be properly insured

Insurance shouldn’t be a guessing game. You don’t have to wait for an accident to find out if you have enough coverage. 

By reviewing your liability limits, confirming your policy is active, and checking your UM/UIM coverage, you can get a clearer picture of how well you’re protected and where potential gaps may exist. 

Now that you understand the differences between being insured, underinsured, and uninsured, your next step may be to understand when minimum coverage makes sense for you. Read Is Minimum Car Insurance Ever Enough? to learn how much coverage is enough for your auto situation. 

Or, if you’re unsure what your policy means and want help with your coverage, feel free to tel:806-762-0544 to talk with an insurance professional. At Grimes Insurance Agency, we’ve been helping West Texas drivers understand their auto insurance coverage since 1948. We’ll connect you with an agent who can help you understand what you’re carrying and where potential gaps may exist.

Frequently Asked Questions

What’s the difference between uninsured and underinsured?

An uninsured driver has no active auto insurance. An underinsured driver has insurance, but their liability limits aren’t enough to cover the full cost of an accident they cause.

Is UM/UIM coverage required in Texas?

Texas insurers are generally required to offer UM/UIM coverage, and drivers can reject the coverage in writing. 

How much auto insurance coverage should I carry?

There isn’t one coverage amount that makes sense for every driver. Your appropriate limits can depend on factors such as your assets, financial circumstances, vehicle, and risk tolerance.

How much does UM/UIM coverage cost?

The cost varies based on your policy and circumstances. Your insurance agent can explain what adding or increasing the coverage would cost for your specific situation.

How Do Insurance Deductibles Actually Work?

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By: Hayley Rodriguez, Personal Lines – Sales Executive

If you’ve ever looked at your insurance policy and wondered, “How much am I actually going to have to pay if I file a claim?”, you’re not alone. Insurance is full of confusing terms and jargon, making it difficult to understand exactly what you need to know. 

However, your deductible can have a big impact on what you pay out of pocket after an accident… and choosing the wrong deductible can leave you scrambling for cash when you need your insurance most. It’s an uncomfortable place to be in. 

At Grimes Insurance Agency, we’ve helped clients understand the basics (including deductibles) behind their insurance policy since 1948. We want policyholders to be educated and confident when it comes to all things coverage.

In this article specifically, we’ll break down:

  • How insurance deductibles work
  • How they affect your premium
  • How to choose a deductible that fits your situation

What is an insurance deductible?

An insurance deductible is the amount of money you agree to pay out of pocket before your insurance company pays its portion of a covered claim. 

For example, if you ding your car door and the repair costs $400, but your deductible is $500, you’d pay for the entire repair yourself. 

Illustrated equation, including Image of a dinged car door labeled "$400 worth of repair" to the left. A greater than sign opens to an image on the right of a dollar sign labeled "$500 deductible". Text below reads "if your deductible is greater than the estimated repair costs, you are responsible for paying the claim".

Why do insurance companies have deductibles?

A deductible isn’t simply your “share” of an insurance claim. It’s also a way for insurance companies to limit small claims and keep insurance focused on larger losses. 

Think about that $400 car-door repair. If your deductible is $500, there’s no reason to file a claim because you’re responsible for the full cost anyway. 

That means you’re more likely to handle smaller repairs yourself, rather than putting every minor ding, scrape, or repair through your insurance. Your deductible creates a line between expenses you can reasonably handle yourself and losses where you need your insurance coverage to step in. 

This is important because your claims history can affect your insurance costs, risk profile, and how insurers view your policy options. Point blank: your deductible can make or break your insurance process. 

Did you know insurance carriers can see every claim you’ve made in the past seven years? Read How is Insurance Risk Calculated to learn how insurers review your claims history and how it can affect your insurance premiums.

Does a higher deductible really lower your insurance premium?

Generally, yes. The formula typically goes this way: 

  • A higher deductible = a lower premium
  • A lower deductible = a higher premium

Raising your deductible will typically reduce your premium. Let’s bring back the car door example to watch the math.

Higher deductible = lower premium

Graphic depicting dinged car door example above. Image of damaged car door with text "$400 of damage repair" beneath it, with a less than sign leading to an arrow reading pointing up reading "higher deductible". Deductible below it reads $500. Equation equals an arrow pointing down reading "lower premium" with a dollar sign.

Because your deductible was higher than the repair cost, you are absorbing more of the financial risk instead of your insurance company. In turn, your insurance company lowers your premium since you shoulder the most risk.

Lower deductible = higher premium

Graphic depicting dinged car door example above. Image of damaged car door with text "$400 of damage repair" beneath it, with a greater than sign opening away from an arrow pointing down reading "lower deductible". Deductible below it reads $200. Equation equals an arrow pointing up reading "higher premium" with a dollar sign.

Because your deductible was lower than the repair cost, your insurance company shoulders the cost. This generally means your carrier will expect to pay more small claims, so it will charge you a higher premium to cover that exposure.

The relationship between deductible and premium

However, at the end of the day, keep in mind: the difference from raising or reducing your deductible isn’t always astronomical. In most cases, you’re looking at relatively modest monthly savings.

That’s why it’s worth asking your insurance agent to show you the actual numbers before you increase your deductible.

If raising your deductible saves you only a few dollars a month, you should consider whether those savings are worth taking on an additional $500 or so of financial responsibility when you have a claim. 

Don’t choose a higher deductible based on the assumption that the premium savings will be significant. Look at the actual numbers for your policy. 

How do you choose the right insurance deductible?

Instead of starting with the premium, start with your bank account.

Ask yourself one question:

If I had a covered loss tomorrow, could I comfortably pay my entire deductible without putting my finances under serious strain? 

  • If you answered no, then your best option is to go with a lower deductible
  • If yes, a higher deductible might suit your needs best.

Graphic of decision chart for the question "Could I pay my entire deductible out of pocket if an accident were to happen today?"

For example, if a $1,000 deductible would force you to put the expense on a credit card, sell something, or scramble to find the money, that’s an important warning sign. 

A West Texas example

That’s especially important here in West Texas, because wind and hail deductibles usually aren’t a flat dollar amount. Instead, they’re a percentage of your home’s insured value, commonly 2%. On a $300,000 home, that’s a $6,000 deductible if hail damages your roof. It’s worth doing that math before a storm hits, not after. And we all know that West Texas storms can often come without warning.

One of our own Grimes members learned this firsthand when a Lubbock hailstorm sent hail straight through her bedroom window, tore holes in her siding, and knocked her patio door off its frame. Because it took time for an adjuster to assess the damage, her windows stayed boarded up for months. 

Storms like that aren’t rare here, and roofs bear the brunt of it. Texas home roofs often age faster due to severe weather and heat. That’s why it’s worth thinking through your deductible before a storm and not during one. If a percentage-based deductible would catch you off guard, talk to your agent about whether a different deductible, or a higher savings cushion, makes more sense for you.

The right deductible isn’t necessarily the lowest or highest number. It’s the amount you can realistically afford when something goes wrong. Your deductible should reflect your financial situation, not what someone else is comfortable paying.

Curious if your policy is measuring up and protecting you where it matters? Read How to Tell if You’re Uninsured to learn where coverage gaps can happen.

Are insurance deductibles different for home, auto, and life insurance?

Depending on the type of insurance policy you have, your deductibles can work differently. Let’s break them down:

Deductible Available? What you should know
Auto Insurance Yes Comprehensive and collision coverages have separate deductibles
Home Insurance Yes Wind, hail, or other claims may have different deductibles
Life Insurance No The beneficiary files a claim and receives the benefit according to the policy terms

The takeaway: don’t assume every policy uses the same deductible. Before you file a claim, check your policy to see which deductible applies to which type of loss. 

Curious how different types of insurance policies actually compare? Read Auto, Home, and Life Insurance Basics to learn how auto, home, and life insurance work and what they cover.

Grimes Insurance Can Help You Determine the Right Deductible

At the end of the day, the right deductible is the amount you could afford to pay out of pocket without creating a financial crisis. 

  • A higher deductible may lower your premium, but you’re taking on more financial responsibility if you have a claim. 
  • A lower deductible generally means paying more for your insurance, but you won’t have to come up with as much money after a covered loss. 

Either option can be beneficial, but it all depends on your financial situation and comfort level.

Insurance is ultimately about managing financial risk. Your deductible is one of the biggest decisions you can make about how much of that risk you’re willing and able to handle yourself. 

Before changing your deductible, ask your insurance agent to show you the actual premium difference. Then compare those savings with the additional amount you’d have to pay if you had a claim. That calculation can make all the difference for your deductible decision. 

Now that you understand how deductibles affect what you pay after a claim, the next step is understanding whether your policy provides enough protection in the first place. Learn How to Tell if You’re Underinsured and which places coverage gaps can happen most often. 

Or, if you’re interested in discussing your policy’s deductibles, contact our office to connect with an agent. At Grimes Insurance Agency, we value educating clients on the insurance basics, helping them feel confident about their policy’s terms and definitions.