The July 4–7, 2025 flash floods across Central Texas, centered on Kerr County and the upper Guadalupe River basin, were catastrophic: torrential rains, up to 17 inches in places, caused the river to surge more than 26 feet within just 45 minutes. This resulted in a flash flood, sweeping away homes and claiming at least 135 lives.
Beyond the tragic loss of life, the disaster laid bare a harsh financial reality: an overwhelming majority of affected homeowners did not have flood insurance. In FEMA‑designated 100‑year flood zones in Kerr County, fewer than 5% of properties were insured; thousands more homes along the Guadalupe and elsewhere suffered devastating damage outside official flood maps.
The illusion of basic homeowners insurance
Standard homeowners insurance in Texas seldom covers flood damage. As Maddie Sloan of Texas Appleseed remarked, loss from flooding is explicitly not protected under typical policies. Homeowners need separate flood coverage, usually from FEMA’s National Flood Insurance Program (NFIP). The majority of homeowners opt not to subscribe to NFIP because of the cost and the assumption that it’s unnecessary. However, increasingly extreme weather shows flood insurance might be a good investment.
Compounding insurance strain: Private insurers pull back
The insurance burden in Texas goes beyond floods. Private home insurers have endured prolonged financial pain: from 2018 to 2022, their loss ratio averaged 102%, meaning they paid out more in claims than they collected in premiums. Sharpened by inflation along with more frequent and more intense storm activity, many insurers are abandoning the state. In 2024 alone, at least four companies exited, affecting around 10,000 policyholders.
The result: remaining homeowners face exorbitant premiums—$4,049/year on average for a $300K home, nearly $1,700 above the national average according to Bankrate. Some Texans have seen quotes double or triple, reaching $6,000–$15,000 annually in high-risk areas. For buyers, this creeping cost inflates monthly housing expenses to unaffordable levels.
The FAIR Plan: A last resort
When homeowners can’t secure private coverage, many turn to the Texas FAIR Plan—the state’s insurer of last resort. It provides minimal coverage, albeit at a steep price, and currently insures over 120,000 properties—double the number from early 2022. While crucial for borrowers needing insurance to finance a home, the FAIR Plan offers scant protection, and critics say it isn’t a long‑term solution.
Implications for housing affordability
The spike in insurance costs is squeezing homebuyers and homeowners alike. In many areas, insurance now rivals or exceeds mortgage payments, shrinking budgets and depressing property values. The insurance crisis risks chilling home purchases, worsening affordability issues, and destabilizing the Texas housing market.
Guest:
Mark Friedlander is a seasoned communications leader in the insurance industry, currently serving as the Senior Director of Media Relations at the Insurance Information Institute (III), based in New York.
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This episode will be recorded on Tuesday, July 22, 2025.
