Homeowners Insurance
Homeowners insurance protects you from financial losses caused by storms, fire, theft, and other events stated in your policy. It is important to know what’s in your policy. Make sure you read your policy carefully and understand your coverages.
It’s also important to know your rights. Texas has a Consumer Bill of Rights for homeowners and renters insurance. Your company must send you the Bill of Rights with your policy or renewal. Don’t wait until you have a claim to review your policy and to know your rights.
Texas Homeowners Policies
You can buy a dwelling policy that covers only the structure of your house, but most homeowners buy a policy that combines five different coverages in a single policy:
- Dwelling pays for damage or destruction to your house and any unattached structures and buildings, such as fences, detached garages, and storage sheds.
- Personal property pays for theft, damage, or destruction of the contents of your house, including furniture, clothing, and appliances.
- Liability protects you against financial loss if you are sued and found legally responsible for someone else’s injury or property damage. A homeowners policy automatically provides $25,000 in coverage. You can buy up to $1 million in coverage for an extra premium.
- Medical payments pays medical bills for people hurt on your property. It also pays for some injuries that happen away from your home, such as your dog biting someone. A basic homeowners policy pays $500 in medical bills. You can pay extra and get up to $5,000 in medical payments coverage.
- Loss of use pays your additional living expenses (temporary housing, food, and other essential expenses) if your home is too damaged to live in during repairs. Most policies pay 10 to 20 percent of the amount of your dwelling coverage.
Types of Policies
Insurance companies may sell several types of policies in Texas, each with a different level of coverage. Three of the policy forms sold in Texas – the HO-A, HO-B, and HO-C – are standardized. This means the policy language and coverages provided by these policies are the same, regardless of the company writing the policy. Although an HO-B policy written by one company will be exactly the same as an HO-B policy written by another company, the two companies may charge different rates.
Companies may offer alternative policy forms, if approved in advance by the state’s Commissioner of Insurance. These policies are not standardized and usually provide varying coverages. Read your policy carefully to know exactly what coverages are included.
Some companies may sell more than one policy form but may offer only one form to customers. If a company offers you a policy with less coverage than you’d like, ask if other policy forms are available. You may also be able to buy additional coverage by adding endorsements to your base policy.
Following is a brief description of the types of policies sold in Texas:
- HO-A policies provide extremely limited actual cash value coverage of your home and its contents. Only the types of damage specifically listed in the policy are covered.
- HO-A amended policies provide more extensive coverage than the base HO-A policy but less coverage than an HO-B. For instance, HO-A amended policies may include replacement cost coverage and coverage of damage from sudden and accidental" water discharges. Neither of these coverages is included in the base HO-A policy. Coverage provided by HO-A amended policies vary by company.
- HO-B policies provide replacement cost coverage for most types of damage, except those specifically excluded in the policy. Generally, HO-B policies provide the most coverage for the price, but some companies do not offer the HO-B policy.
- HO-C policies provide the most extensive coverage, but they are more expensive than other types of policies.
- Approved alternative policies offer varying levels of coverage. Companies can sell alternative policies only if the policy form is approved in advance by the Commissioner of Insurance. Coverage may differ considerably from one company to another.
To compare coverages fro policies approved for sale in Texas, visit the Office of Public Insurance Counsel (OPIC) website.
What Homeowners Policies Do and Don’t Cover
Most Policies Cover Losses Caused by |
Most Policies Do Not Cover Losses Caused by |
| Fire and lightning | Flooding |
| Aircraft and vehicles | Earthquakes |
| Vandalism and malicious mischief | Termites |
| Theft | Insects, rats, or mice |
| Explosion | Freezing pipes while your house is unoccupied (unless you turned off the water or heated the building) |
| Riot and civil commotion | Wind or hail damage to trees and shrubs |
| Smoke | Losses if your house is vacant for 60 days or more |
| Windstorm, hurricane, and hail (unless you live on the Gulf Coast) | Wear and tear or maintenance |
| Sudden and accidental water damage | Water damage resulting from continuous and repeated seepage |
Wind and hail coverage. Companies may exclude coverage for certain losses. For example, if you live on the Gulf Coast, you might receive an endorsement that excludes coverage for wind and hail damage. In areas with a history of hail storms, some companies provide only actual cash value coverage instead of full replacement cost for roofs. Actual cash value pays for damage minus depreciation on the roof, depending on its age and condition.
Mold coverage. Most policies will not cover mold remediation beyond the amount necessary to repair or replace property damage caused by a water loss otherwise covered by the policy. The HO-A policy doesn’t cover mold remediation or damage caused by water leaks, but some companies offer an endorsement that covers sudden and accidental water leaks. Some, but not all, of the other approved policies also cover sudden and accidental water leaks. Read your policy or ask your agent whether your policy covers water leaks and mold remediation.
Insurance companies are required to offer you mold remediation coverage. Depending on the company, this coverage will be offered in dollar or percentage increments up to 100 percent of your policy’s limits. If you have questions or concerns about how a mold claim is being handled, or if you need information about how to minimize mold losses, ask your insurance company for a set of guidelines regarding mold claims.
Policy Dollar Limits
If you insure your house for $100,000, that’s the most you will get if it’s destroyed, even if it would cost more to replace it. The Declarations Page at the front of your policy shows your policy’s dollar limits. Talk with your agent or company representative if you have any questions about your insurance limits. If a fire destroys your home, Texas law requires the insurance company to pay the full amount of the policy, even if this amount is more than the replacement cost.
Don't wait until you have a claim to learn your policy’s dollar limits.
Replacement Cost Coverage of Your House
The HO-B and HO-C policies provide replacement cost coverage for your house, up to your policy’s dollar limits. 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 does not include the value of your land. If you are not sure of the amount it would cost to rebuild your home, your company or agent usually has construction cost tables to help you determine the cost.
To receive full payment (minus your deductible) for a partial loss, such as a hail-damaged roof, you must 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 a partial loss.
Unless you buy an endorsement increasing your coverage, HO-A policies only provide actual cash value coverage. Actual cash value is the replacement cost of your property minus depreciation. If your home is destroyed and you only have actual cash value coverage, you may not be able to completely rebuild.
If you have an HO-A amended policy or an approved alternative policy, read your policy carefully to know whether it offers replacement cost coverage or actual cash value coverage.
Maintain Adequate Coverage
Buy enough coverage to avoid a major financial loss if your home is severely damaged or destroyed. This means keeping a realistic dollar amount of coverage on your house.
Coverage for Your Personal Property
HO-B policies automatically cover household contents – furniture, clothes, appliances, etc. – up to 40 percent of the amount of your dwelling coverage. This means if your house is insured for $100,000, its contents are insured for up to $40,000. You can get more coverage by paying a higher premium.
Personal property coverage pays only the actual cash value of damaged, stolen, or destroyed household goods unless you buy replacement cost coverage. Actual cash value is an item’s replacement cost, minus depreciation.
Replacement cost coverage offers you more protection than actual cash value coverage. For example, if a burglar steals your six-year-old television set, and you only have actual cash value coverage, you get only what you would expect to pay for a six-year-old television set. With replacement cost coverage, the insurance company pays to replace your TV with a new set similar to the stolen one.
Companies generally want you to prove that you replaced an item before they’ll pay your claim in full. However, if you have an HO-B policy, the company must advance you the first $1,500, plus the depreciated value of any other damaged property, without requiring proof of replacement. After that, the company must pay you within five business days after receiving proof you replaced, restored, or repaired the property. A company can offer to replace the items instead of paying cash, but the choice is yours.
Take Inventory of Your Property
Many people learn after a fire or storm that they didn’t have enough personal property coverage. Making an inventory will help you decide how much insurance you need. It will also simplify claims.
Your inventory should list each item, its purchase date, value, and serial number. Photograph or videotape each room, including closets, open drawers, storage buildings, and garage. Keep the inventory and receipts for major items in a fireproof place or another location.
Homeowners insurance on certain personal items like jewelry and furs is limited. You may be able to buy more coverage for an extra premium.
Other Residential Policies
- Renters insurance: A landlord’s insurance does not 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 from your rented home.
- Condominium insurance: Condominium insurance matches the benefits of renters insurance, and also covers damage to improvements, additions, and alterations to the condominium unit.
- 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 does not have a master policy on the building, you can purchase a homeowners policy on your individual unit. If the association has a master policy, you should get a Texas tenant homeowners policy to insure your personal property.
- Mobilowners insurance: Mobile homes without wheels and resting on blocks or a permanent foundation qualify for a homeowners policy. However, most mobile homes are insured by a mobilowners policy. A mobilowners policy is actually an auto policy that covers mobile homes used as residences. Mobilowners policies offer extremely limited coverage.
- Farm and ranch insurance: Farm and ranch owners policies insure homes outside city limits on land used for farming and raising livestock. You can pay extra to get coverage for certain farm equipment and outbuildings.
Other Types of Insurance You Might Need
Flood Insurance
Texas ranks near the top of the nation in weather-related property damage each year. A large portion of this damage is caused by flooding.
Homeowners policies do not cover flood damage. To protect yourself from losses caused by most flooding, you can purchase a separate flood insurance policy from the National Flood Insurance Program (NFIP) administered by the Federal Emergency Management Agency. Local insurance agents sell NFIP flood policies and can tell you about the program in your area. For more information, call NFIP
1-800-427-4661
www.floodsmart.gov
If a lender determines that a property is at a high risk of flooding (called being in a “special flood hazard area”), it will require you to purchase flood insurance. A special flood hazard area has a 1 percent chance of being flooded in any given year.
Hurricanes and Windstorm Insurance
The Texas Windstorm Insurance Association (TWIA) is the state’s insurer of last resort for wind and hail coverage in the 14 coastal counties and parts of Harris County on Galveston Bay. TWIA provides wind and hail coverage when insurance companies exclude it from homeowners and other property policies sold to coastal residents. You can buy TWIA coverage through local insurance agents if you need it.
When a hurricane enters the Gulf of Mexico (80 degrees longitude and 20 degrees latitude), you can no longer change or purchase new windstorm coverage.
Your agent can tell you how to get an inspection. For more information about windstorm coverage, contact TWIA
1-800-788-8247
www.twia.org
Earthquake Insurance
If you are concerned about earthquakes, you can get coverage with a separate policy. The cost is relatively low because earthquakes are rare in Texas.
Extra Coverage (Endorsements)
You might want more coverage than your policy provides for certain items. For an extra premium, you may be able to buy endorsements that expand or increase the coverage on these items. Some of the most common endorsements expand or increase coverage for jewelry, fine arts, camera equipment, coin or stamp collections, computer equipment, and radio and television satellite dishes and antennas.
Personal Umbrella Liability Insurance
If you have assets to protect and want more liability coverage than a homeowners policy provides, you can buy a separate umbrella policy. Because policies vary, make sure the agent or company fully explains the coverage.