Texas Homeowners Insurance – Texas Hazard Insurance
State of Texas – Insurance
Texas is the largest State in the lower 48 contiguous States and the second largest State in the Union when including Alaska. Texas has the largest population of all States in the U.S., spread amongst many large towns including: Houston, San Antonio, Dallas, Austin, Fort Worth, and El Paso; each of the aforementioned have a population between 650,000 and 2,500,000 residents. Texas is an important State to concentrate on for insurance carriers; however, this does not come without risk – the Southern Counties are affected by adverse weather and floods posing great challenges for insurers.
Texas Homeowners Insurance
Homeowners Insurance, also known as Hazard Insurance, pays to repair or replace your dwelling and personal property if they’re damaged or destroyed by a covered loss as defined in your policy.
An insurance policy is a contractual agreement between an insurance carrier and the named insured. It is important to review it carefully and understand the coverage and limits. In Texas, it is required by law for an insurance carrier to send the Bill of Rights to the customer (insured).
Texas Homeowners Policies
Homeowners policies in Texas commonly include the following coverage:
- Dwelling pays if your house is damaged or destroyed by a covered loss.
- Personal property pays if the items in your house are damaged, stolen, or destroyed.
- Other structures pays to repair or rebuild structures not attached to your house, such as detached garages, storage sheds, and fences.
- Loss of use pays your additional living expenses (housing, food, and other essential expenses) if you must temporarily move because of damage to your house from a covered loss.
- Personal liability pays to defend you in court against lawsuits and provides coverage if you are found legally responsible for someone else’s injury or property damage.
- Medical payments pays the medical bills of people hurt on your property up to the limit listed on the policy.
Note about replacement cost and actual cash value:
- Replacement cost is what you would pay to rebuild or repair your home, based on current construction costs. Replacement cost is different from market value and doesn’t include the value of your land.
- Actual cash value is what you would pay to rebuild or replace your property minus depreciation. Depreciation is a decrease in value due to wear and tear or age.
Companies may exclude coverage for certain losses. Even the most comprehensive all-risk policy will exclude certain types of damage.
The following chart shows the most common types of losses covered or excluded from a homeowners policy:
Most Policies Cover Losses Caused by
Most Policies Do Not Cover Losses Caused by
|Fire and lightning||Flooding|
|Sudden and accidental damage by smoke||Earthquakes|
|Explosion||Termites, insects, rats, or mice|
|Theft||Freezing pipes while your house is unoccupied (unless you turned off the water or heated the building)|
|Vandalism and malicious mischief||Losses if your house is vacant for the number of days specified by your policy|
|Riot and civil commotion||Wear and tear or maintenance|
|Aircraft and vehicles||Wind or hail damage to trees and shrubs|
|Windstorm, hurricane, and hail (this coverage may be excluded if you live on the Gulf Coast)||Mold, except what is necessary to repair or replace property damage caused by a covered water loss|
|Sudden and accidental water damage||Water damage resulting from continuous and repeated seepage|
Policy Dollar Limits
A policy’s dollar limits are the maximum amounts your insurance company is obligated to pay in the event of a covered loss. The Declarations Page is the summary page attached to the policy and shows the policy’s dollar limits.
To receive full payment (minus your deductible) for a partial loss (such as a hail-damaged roof) most companies require you to insure your house for at least 80 percent of its replacement cost. If you insure your house for less than 80 percent of the full replacement cost, the insurance company will only pay a portion of the loss; this is known as the coinsurance clause. Most preferred carriers require you to insure your house for 100 percent of its replacement cost.
Coverage for Your Personal Property
Homeowners policies provide coverage for your personal property (such as furniture, clothing, and household electronics).
Homeowners policies usually cap the coverage amounts for certain types of personal property, such as jewelry, silverware, furs and art. You may be able to buy additional coverage for these items for an extra premium.
Inventory Your Property
Many people learn after a fire or burglary that they aren’t able to remember exactly what is missing without either a detailed inventory or photos of each room in the home prior to the loss. A written inventory will help one decide how much insurance would be required in the event of a total fire loss.
It would be a great idea for each insured homeowner to digitally photograph or videotape each room, including closets, open drawers, storage buildings, and garage; these digital files can be stored on a cloud based network or simply on a disk with copies in more than one location. A written inventory and receipts for major items should be stored in a fireproof safe or an alternate location.
Other Types of Residential Property Policies
- Renters insurance. A landlord’s insurance policy doesn’t cover a renter’s personal property. Renters insurance covers your belongings, provides liability protection, and pays additional living expenses if a fire or other event stated in your policy forces you to move temporarily.
- Condominium insurance. Condominium insurance covers your belongings, provides liability protection, and pays additional living expenses. It also covers damage to improvements, additions, and alterations to the condo.
- Townhouse insurance. Townhouses may be insured by either an individual homeowners policy or an association master policy. If a townhouse is owner-occupied and the townhouse association doesn’t have a master policy on the building, you can purchase a homeowners policy on your individual unit.
Other Types of Insurance You Might Need
Windstorm and Hail Insurance
Most homeowners policies don’t cover windstorm and hail damage if you live in any of the 14 coastal counties or parts of Harris County on Galveston Bay. The Texas Windstorm Insurance Association (TWIA) is the state’s insurer of last resort for windstorm and hail coverage. Once a hurricane has entered the Gulf of Mexico (80 degrees longitude and 20 degrees latitude), you may no longer change or buy windstorm coverage.
For more information about windstorm coverage, contact TWIA at 1-800-788-8247 or online at www.twia.org.
Homeowners policies don’t cover flood damage. To protect yourself from losses caused by most flooding, you may buy a separate flood insurance policy from the National Flood Insurance Program (NFIP). The Federal Emergency Management Agency (FEMA) runs NFIP. If your property is in a special flood hazard area, your lender will require you to have flood insurance. A special flood hazard area has a 1 percent chance of being flooded in any given year.
TWIA flood insurance requirement. Some Gulf Coast residents must buy flood insurance to be eligible for a TWIA policy. The requirement applies to you if
- you constructed, altered, remodeled, or enlarged your property (to the extent that a certificate of compliance is required) on or after September 1, 2009
- any part of your property is in flood zones V, VE, or V1-V30 as defined by NFIP
- flood coverage is available from NFIP.
Property repairs are excluded from the requirement. Repair is defined as the reconstruction or restoration of a structure that is damaged or deteriorated.
To view flood maps, visit FEMA’s website at www.floodsmart.gov/floodsmart/.
Extra Coverage (Endorsements)
If you want more coverage than the policy offers, you might be able to add an endorsement to your policy for an extra premium.
The following are common endorsements you can consider adding to your policy:
- Backup of sewers or drains. Pays for damage caused by sewer or drain backup.
- Extended or additional dwelling replacement coverage. Pays up to a certain amount if your policy doesn’t pay enough to rebuild your home.
- Law or ordinance coverage. Pays if repair costs are higher because of local building codes or ordinances.
- Replacement cost-dwelling. Pays replacement cost after you repair or replace your property.
- Replacement cost-personal property. Pays replacement cost after you repair or replace your property.
Personal Umbrella Liability Insurance
If you have assets to protect and require more personal liability coverage than a homeowners policy provides, you can buy a separate umbrella policy. The Personal Umbrella Policy provides a secondary layer of coverage picking up where your underlying Homeowners and Automobile limits are exhausted. The Personal Umbrella Insurance will require a minimum underlying limit of liability on both the Homeowners and Automobile policy.
Review your Policy
After you buy a policy, review it to ensure that everything is correct. Review the following items listed on the declarations page:
- Your name and the property location.
- Policy period. This is the date the policy is in effect. Your mortgage company or lienholder will use this date to ensure that you have insurance on your property.
- Coverage. This section lists your property and liability coverage and limits. Consider whether your property coverage limits are high enough to replace your house and personal property if they are damaged or destroyed. You can increase property and liability coverages if you don’t think they’re high enough.
- Deductible. The deductible is listed as a dollar amount and a percentage for each type of coverage. The deductible is the amount that will be deducted from your payout in the event of a covered claim.
- Policy premium. This is the cost of your policy after your endorsements and discounts.
- Mortgagee. Make sure the name, address and loan number of your mortgagee are correct. The listed address will be where the insurance carrier will mail the ‘Mortgagee Copy’ of your insurance policy; if this is incorrect, you will most likely receive a letter from your mortgage company.
Understanding Rates and Premium
Factors that Affect Your Premium
Companies use a process called underwriting to decide whether to offer a policy and what rate to charge. Each company must file its underwriting guidelines with Texas Department of Insurance and send updates if the guidelines change. Companies use various factors to determine premium. These include:
- Home’s age and condition. Preferred companies will refuse to insure homes in poor condition, but they may not deny coverage solely because of a home’s age or value. Companies will charge more if insuring an older house. If one has a replacement cost policy, the policy will pay to rebuild the insured home if it’s destroyed by a covered peril. Premiums will increase in relation to the amount of replacement or reconstruction cost.
- Construction materials used in home. Homes built primarily of brick are less expensive to insure than frame homes since brick homes are less likely to burn.
- Where you live. Premium will likely be higher in areas with a higher crime or high storm activity; premium is always assessed in relation to risk.
- Availability of local fire protection. Premium are usually lower for homes in areas with access to good fire protection. Protection classes are assessed to areas based on distance from closest fire station and distance between fire hydrants.
- Your claims history. Companies use claims history to determine what to charge for your coverage. Your claims history includes both the type and the number of claims filed. Claims activity may also disqualify one from insuring with a ‘preferred carrier’ most often offering the lowest premium.
- Your credit score. In Texas, companies may consider your credit score when deciding whether to insure a home and the premium to assess. However, a carrier may not refuse to insure, cancel or nonrenew a policy solely because of credit score. Companies that use credit scoring must file their credit scoring models with the Texas Department of Insurance. It would be prudent to review your credit report each year and correct any errors as carriers are permitted to grade risk utilizing personal finances as a factor.
Discounts can reduce insurance premium. All companies offer some type of premium discounts when reducing risk. Each company sets the amount of the discounts it offers. A discount may be offered for having:
- an impact-resistant or noncombustible roof
- burglar, fire, and smoke alarms
- an automatic sprinkler system
- fire extinguishers
- other policies with same company or group
- no claims for three years in a row.
Some discounts may be automatically offered based on the criteria obtained to get a home insurance quote, whilst others may require proof or certification. Some carriers offer discounts for marital status, age & accredited builder discounts on newer homes.
Many companies use the Comprehensive Loss Underwriting Exchange (CLUE) to review your claims history. CLUE reports list the property insurance claims history of people and houses – regardless of who owned them – for the last seven years.
Companies are only allowed to report information if someone filed a claim. Federal law gives you the right to challenge wrong information. If an insurance company based part of its decision to deny you coverage on a CLUE report, you can get a free copy of the report by calling LexisNexis Personal Reports at 1-866-527-2600 or by visiting its website at https://personalreports.lexisnexis.com/index.jsp
Before calling, get the CLUE reference number from the company’s denial letter or from the company. Using the reference number will speed the process by making sure you are requesting the right report. CLUE is a registered trademark of Equifax