Homeowners insurance protects you from financial losses caused by storms, fire, theft, and other events outlined in your policy. It is important to know what´s in your policy. This publication gives you general information about homeowners insurance, but it is not a substitute for the policy itself. Make sure you read your policy carefully and understand your specific 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 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. Or, like most Texans who own their homes, you can buy a homeowners policy, which combines five different types of coverage:
Dwelling - pays for damage to your house and any outbuildings, such as detached garages and storage sheds.
Personal property - pays when household items, including furniture, clothing and appliances, are damaged, stolen, or destroyed.
Liability - protects you against financial loss if you are 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 while 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 living expenses if your home is too damaged to live in during repairs. The most common policy pays up to 20 percent of the amount for which your house is insured.
Types of Homeowners Insurance Coverages
Insurance companies may sell several types of policies in Texas, each with a different level of coverage. Three of the policy forms available for sale 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. Keep in mind, however, that 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 also offer alternative policy forms, if approved in advance by the 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. In general, however, a company will offer only one form to its customers. If a company offers you a policy with less coverage than you´d like, ask if other policy forms are available. You also may be able to add additional coverage by buying 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. The HO-A is a standardized Texas policy.
- HO-A amended policies provide more extensive coverage than the base HO-A policy but less coverage than an HO-B. HO-A amended policies are not standardized. Coverage provided by these policies may differ by company.
- HO-B policies provide replacement cost coverage for most types of damage, except those specifically excluded in the policy. The HO-B is a standardized Texas policy.
- HO-C policies provide the most extensive coverage, but they are more expensive than other types of policies. The HO-C is a standardized Texas policy.
- 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. These policies are not standardized. Coverage may differ considerably from one company to another and from the coverage provided in the standardized Texas homeowners policies.
Generally, HO-B policies provide the most coverage for the price, but some companies do not offer the HO-B policy. For a side-by-side comparison of the coverages provided by the policy forms approved for sale in Texas, visit the website of the Office of Public Insurance Counsel
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 & 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||Wear and tear or maintenance|
|Sudden and accidental water damage||Water damage resulting from continuous and repeated seepage|
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 for roofs instead of full replacement cost. Actual cash value pays for damage minus depreciation on the roof, depending on its age and condition.
Most policies will not cover mold remediation beyond that necessary to repair or replace property damaged by a water loss otherwise covered by the policy. The HO-A policy offers no coverage for mold remediation or for damage caused by water leaks, although some companies may offer coverage for sudden and accidental water leaks as an endorsement to the base HO-A policy. Some of the other approved policy forms also cover sudden and accidental water leaks, while others may not. 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.
Other Residential Policies
- Renters: A landlord´s insurance does not cover a renter´s personal property. Renters insurance covers your belongings, provides liability protection, and pays extra living expenses if a fire or other disaster forces you to move temporarily from your rented home.
- Condominiums: Condominium insurance matches the benefits of renters insurance, and also covers damage to improvements, additions, and alterations to the condominium unit.
- Townhouses: 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.
- Mobile homes: 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 owners: Farm and ranch owners policies insure homes outside city limits on land used for farming and raising livestock. You can pay extra and get coverage for certain farm equipment and outbuildings.
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.
Replacement Cost Coverage of Your House
The standardized 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. It 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 figure 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 pay only part of the expense 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 it.
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.
Your Policy´s Dollar Limits are Important
If you insure your house for $100,000, that´s the most you will get if it is destroyed, even if it would cost more to replace it. The Declarations Page on the front of your policy shows how much coverage you have. 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 limit.
Coverage for Your Personal Property
HO-B policies automatically cover household contents - furniture, clothes, appliances, etc. - up to 40 percent of the amount your house is insured for. This means if you insure your house for $100,000, its contents are insured for up to $40,000. You can get more coverage by paying a higher premium. However, this automatic coverage pays only the actual cash value of damaged, stolen, or destroyed household goods. Actual cash value is an item´s replacement cost, minus depreciation.
You may be able to pay extra and buy replacement cost coverage that ignores depreciation and pays for a new item like the one you lost.
Replacement cost coverage gives you more protection than actual cash value coverage. The following example illustrates why: A burglar steals your six-year-old television set. With 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 proof you replaced an item before paying 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.
Inventory 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 also will simplify claims.
Your inventory should list each item, its value, and serial number. Photograph or videotape each room, including closets, open drawers, storage buildings, and your garage. Keep receipts for major items in a fireproof place.
Homeowners insurance on certain items like jewelry and furs is limited. You may be able to buy more coverage for an extra premium.
Other Types of Insurance You Might Need
Texas ranks at or near the top of the nation in weather-related property damage each year. A large portion of this damage is due to flooding.
Homeowners policies do not cover flood damage. However, the National Flood Insurance Program (NFIP) offers flood coverage in many areas. Local insurance agents sell NFIP flood policies and can tell you about the program in your area.
For more information, call NFIP
If a lender determines that a property is in a special flood hazard area, the borrower is required to purchase flood insurance. A special flood hazard area has a 1 percent chance of being inundated by flood.
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.
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 for certain items than your policy provides. 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 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.
Shopping for Homeowners Insurance
Rates vary widely among companies, so it pays to shop around. Following are some useful tips to help you find the best deal for your money:
- Decide before shopping the specific coverages and coverage amounts you need.
- Choose the highest deductible you can afford. Your deductible is the amount you must pay yourself before the insurance company will pay. Higher deductibles will lower your premium, but remember that you´ll have to pay more out of your own pocket if you have a claim.
- Because rates vary, ask several companies and agents for price quotes. When comparing rates, make sure they are for the same coverages. TDI publishes a homeowners rate guide that can help you shop. The rate guide lists companies and their annual premiums for policies with $100,000 coverage on the house, $40,000 on its contents, and a 1 percent ($1,000) deductible.
- When getting a price quote or applying for insurance, answer questions truthfully. Wrong information could cause you to get an incorrect price quote or could lead to a denial or cancellation of coverage.
- Consider factors other than price, including a company´s financial rating and its complaint index. Financial ratings indicate a company´s financial strength and stability, while the complaint index indicates a company´s customer service record. Buy only from licensed companies and agents. You can find out whether a company or agent is licensed and learn a company´s financial rating from an independent rating organization and its complaint index calling TDI´s Consumer Help Line or by visiting the TDI website
- 463-6515 in Austin
- Ask your agent whether you qualify for discounts. Some discounts are required by the state, while others are optional with companies.
Factors that Affect Your Premium
Companies may use a number of criteria to establish your individual premium. These include:
- The age and condition of your home. Older homes and homes in poor condition generally are more expensive to insure. In addition, companies may refuse to insure homes in poor condition. However, they can´t deny coverage solely because of a home´s age or value.
- Your home´s replacement cost. Since your policy will pay to rebuild your home if it is destroyed by a covered loss, premiums are more expensive for homes with a high replacement cost.
- The construction materials used in your home. Homes built primarily of brick are less expensive to insure than frame homes.
- Where you live. Premiums will likely be higher for homes in areas with a high frequency of storms, such as tornados or hailstorms, or with a high incidence of theft.
- Availability of local fire protection. Homes with access to good fire protection services get better rates. If you live in an area with limited fire protection, your rates will be higher.
- Your claims history. Companies will charge more if you´ve filed claims in the past. Before filing a claim, it´s a good idea to ask your agent or the company´s underwriting department how it will affect your premium at renewal time. For less expensive losses, it may be cheaper in the long run to pay for repairs yourself rather than file a claim. This is especially true for repairs that wouldn´t cost much more than the amount of your deductible.
- Your credit score. Companies may consider your credit score when deciding whether to sell you a policy and what to charge you. However, a company cannot refuse to sell you a policy or cancel or nonrenew your policy solely on the basis of your credit.
Discounts can help you save money on your insurance. Companies may offer premium discounts if you take steps to reduce the chances of a loss. Each company sets the amount of the discounts if offers to its policyholders. Some of the more common discounts are listed below:
- Impact-resistant roofs
- Noncombustible roof
- Marking personal property with an identifying number (inspection required)
- Age of house (companies set own standards)
- Premises in good condition (companies set own standards)
- Good claims experience for three consecutive years
- Other policies with same company or group
- House insured to full replacement cost
- Senior citizens discount
- Burglar, fire, and smoke alarm systems
- Automatic sprinkler systems
- Fire extinguishers
- Home security devices
Having Trouble Insuring Your Home?
Sometimes, finding adequate and affordable insurance can be difficult. If you are having difficulty finding a homeowners policy, you should:
- Remove Potential RisksYou can make your home more insurable by changing things that insurance companies and agents interpret as signs of potential risk. Look around your home for problems that could cause damage or injury, such as a heavy tree limb hanging over your roof, loose porch railings, or cracks in your walkways.
- Watch Out for CrimeSince theft is a common cause of homeowners claims, some insurers may not be willing to insure homes that seem vulnerable to crime. While you cannot stamp out crime by yourself, you can take a few steps to make yourself less vulnerable. These precautions could also lower your insurance premiums.
- Call the crime prevention officers of your local police force. They can inspect your home and give you specific advice on protecting it.
- Install dead bolts or other security devices on doors and windows.
- Work with your neighbors to start a Neighborhood Watch Program. Your local police department has helpful information.
- Install a burglar alarm that alerts the police or a security company.
- Keep trees and shrubs trimmed, especially around windows and entryways. Overgrown shrubbery can provide hiding places for would-be burglars. Avoid parking cars on the street. Cars parked on the street are tempting targets for thieves and vandals and, like overgrown shrubs, can provide handy hiding places.
- Keep the area around your home well-lit.
- Permanently mark personal property with an identifying number to aid in identification if stolen items are recovered
- Maintain Your House and YardYour home´s appearance is important when you´re looking for insurance. Since companies want to avoid losses from injuries or accidents, agents look for signs of poor maintenance. Agents might assume that a cluttered yard and faded paint suggest an unsafe home. The outside of your home will be inspected when you apply for insurance, often when you are not at home. Insurance companies have the right to cancel a policy within the first 60 days, and some may reject new customers because an inspection revealed a home in need of repair.
- Fix any obvious signs of damage, such as rotting boards, sagging screens, or a loose front door.
- Remove anything from your property that could easily cause an accident.
- Replace a damaged or badly worn roof. Water stains on a ceiling tell an agent inspecting the inside of your home that you might have a future claim for water-damaged property.
- Keep your yard clean and trim.
- If your paint is peeling or faded, consider repainting.
Texans having trouble finding homeowners insurance from licensed companies have several places to turn for help. The following free programs may be able to help:
Texas FAIR Plan Association
The Texas FAIR Plan Association provides residential property insurance to qualified consumers. To be eligible for coverage, a consumer must have been denied insurance by at least two licensed insurance companies actually writing residential property insurance in Texas and may not have received a valid offer of comparable insurance from a company licensed in Texas. Coverage is the standard Texas HO-A policy form. For more information, visit the Texas FAIR Plan Association website or call the Texas Department of Insurance (TDI)
If you´re still unable to find insurance, your last resort might be to obtain insurance from a surplus lines carrier. Surplus lines carriers are out-of-state companies not licensed in Texas, but legally eligible to sell insurance on risks that licensed companies won´t cover. Surplus lines carriers generally charge more than licensed companies and often offer less coverage. Surplus lines carriers are not members of a guaranty association. This means that your claims might go unpaid if the surplus lines carrier becomes unable to pay its claims.
Before you buy from a surplus lines carrier, make sure there are no other options. Agents must make a "diligent effort" to find coverage with a licensed company before offering you a surplus lines policy. Ask which licensed companies turned you down, and why. Companies must justify rejections.
Losing Your Insurance
Knowing your rights can help you if you are rejected for homeowners insurance or lose your coverage. If you request it, a company must explain in writing its reason for declining, canceling, or not renewing your policy. Texas law prohibits companies from denying, canceling, or refusing to renew a policy solely on the basis of your credit. You may file a complaint with TDI if you believe a company improperly denied you insurance.
Many companies use the Comprehensive Loss Underwriting Exchange (CLUE) to review an applicant´s claims history. CLUE lists the property insurance claims history of houses - regardless of ownership - and individuals for the preceding three years.
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 the ChoicePoint Consumer Center or visiting its website
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 Inc.
Cancellation and Nonrenewal
Cancellation means either you or the insurance company stops coverage before your policy´s normal expiration date. When a policy is canceled, the company must refund your premium, minus the portion paid for coverage actually received.
Nonrenewal means a company refuses to renew your policy when it expires. A company must give you written notice at least 30 days before your policy´s expiration date. If the company does not notify you in writing in the required time, it must renew the policy at your request.
Note: A company cannot nonrenew or raise your premium because of a claim you filed that was not paid or was not payable under your policy.
Cancellation & Nonrenewal Summary for Homeowners, Renters, Condominium, Dwelling, and Farm and Ranch Owners Policies
- Notice Required: 10 days (30 days´ notice is required if the policy is canceled within the first 60 days)
- A company may cancel your policy within the first 60 days only if it identifies an undisclosed additional risk of loss that is not the subject of a prior claim
- A company may not cancel your policy after 60 days, except for fraud, increased risk, or nonpayment of premium
- Notice required: 30 days
- A company may nonrenew your policy for deterioration of your property or if you file three or more nonweather-related claims in three years
- If the company fails to notify you after a second nonweather-related claim, it cannot refuse to renew your policy because of a third claim.
- A company cannot use the first two appliance-related claims to determine the number of nonweather-related claims for the purposes of nonrenewing your policy.
- Instead of nonrenewal, the company can charge an added premium called a surcharge. A company can add a surcharge for filing two or more nonweather-related claims the previous policy year.
- A company may require you to make repairs to your home before renewing your policy. Generally, companies will give you six months to a year to make repairs. If the repairs are needed because of a storm or other covered loss, the company must pay for the work (minus your deductible). If the repairs are required because of deterioration or normal wear and tear - a worn-out roof, for instance - you are responsible for paying for them yourself.
A company may not nonrenew your policy for weather-related claims or for claims that were not paid or not payable under your policy.
Also, keep in mind that if you move out of your house and it remains vacant for 60 days or longer, most policies automatically suspend coverage for damages. The policy´s liability coverages will continue, however. The vacancy also could cause the company to refuse to renew the policy when it expires.
If You Have a Claim
If you have a claim, the company must start investigating your claim within 15 days after receiving written notice. However, the company may ask you for more information. Once you send the information, the company has 15 business days to accept or reject your claim. If the company agrees to pay, it must do so within five business days. If the company rejects your claim, it must say why in writing.
- A company that needs more time can take 45 days to make a decision if it sends you a notice explaining the delay.
- A company that suspects arson has 30 days after receiving the required paperwork to either accept or reject a claim.
- TDI can give companies an extra 15 days after a major natural disaster.
- Surplus lines carriers have 20 days to pay your claim after agreeing to do so.
A company that takes too long to pay is liable for your reasonable attorney fees plus damages equal to 18 percent of your claim if you sue and win. In an insurance claim lawsuit, the insurance company has the burden of proving it was not obligated to pay. If you are financing your home, your insurance company may require your lender to sign or approve your claim check. When this happens, the lender must act within 10 business days after receiving the request. Failure to act within this time period could result in a $500 civil penalty. Complaints about lenders failing to process claim payments should be directed to the Texas Attorney General´s Office
To make the claim process run smoothly and to protect your rights, follow these steps:
- Know your coverage. Your policy´s dollar limits and benefits appear on your policy´s Declarations page. If you need help, ask your agent or company representative.
- If you have a loss, notify your agent or insurance company immediately. Report losses involving theft or crime to the police.
- Make a list of your damaged property. If possible, photograph or videotape the damage before making any repairs.
- Make only temporary repairs to protect your house and belongings. The insurance company may deny your claim if you make permanent repairs before it inspects the damage. If you are not sure whether a repair is considered permanent, contact the insurance company before beginning repairs. The cost of these repairs and for storing personal belongings is covered by your policy. It is important to make only temporary repairs.
- Keep receipts. For personal property claims, you must provide evidence that you bought the replacement items. If you bought materials for temporary repairs, receipts will help you get reimbursed quickly.
- Try to be there when the insurance company´s adjuster inspects your home. You may have your own contractor or builder represent you. In times of major disasters, it might not be possible to meet with the adjuster.
- If you have to move because of a disaster, make sure your address is visible. Leave a sign with your temporary address, phone number, and the name of your insurance company.
Proof of loss. Within 15 days after you report your loss, the company may request a signed, notarized proof-of-loss form. In most cases, the company will ask you to estimate the replacement cost of the household items you lost and the cost of repairing your home. Contractors, catalogs, and retailers are good sources of current price information.
- Include sales tax in your cost estimates.
- Ask whether you should use exact costs, or if you can round numbers to the nearest dollar.
- Don´t forget to include small items such as kitchen utensils or clothing accessories.
- The company will use the form to decide the value of your claim, so make your list as complete and as detailed as possible. Include photos and receipts. Be sure to keep copies for your records.
Final estimate. The adjuster will prepare an estimate of the cost to repair or replace your home and any personal belongings. The insurance company´s offer is based on this estimate.
Disputes. If you disagree with the adjuster´s estimate, tell the company why. The company may have overlooked something and may make adjustments. If you still disagree, you can use a process called appraisal.
The appraisal process governs only disputes over the amount to be paid. It is not for settling disputes about coverage or the cause of a loss.
You and the company each hire an appraiser. The two appraisers then choose a third one as umpire. Your appraiser and the company´s appraiser make their own estimates of your loss. If they differ, the umpire makes the final decision, which is binding on both you and the company. You are responsible for the expenses of your appraiser and for half of the umpire´s expenses.
Public insurance adjusters. Public insurance adjusters charge fees to help negotiate claim settlements with insurance companies. If you hire a public adjuster, you may have less money to repair or replace your property. The public adjuster´s fee may be a flat fee, an hourly rate, or a percentage of the amount paid in the settlement of the claim. The method for calculating the commission must be included in the public adjuster´s contract with you, along with a statement that the adjuster´s commission may not exceed 10 percent of the entire claim. In some instances, a public adjuster is entitled only to reasonable compensation for time and expenses. Public adjusters may not give legal advice and may not participate, either directly or indirectly, in the reconstruction or repair of your damaged property. Nor may they engage in any activity that would be a conflict of interest.
Payment. Once the company agrees to pay all or part of your claim, it must do so within five business days. If you don´t get your check within five days, contact your agent or company.
Note: Most companies pay homeowners claims with two checks. The first, issued after the adjuster reviews your loss, is for the estimated cost of repairs, minus depreciation and your deductible. The company issues the second check for the balance of your claim after receiving the contractor´s bill for the finished job, as long as the repairs or replacements are completed within 365 days of the date of loss. You may submit a written request for an additional 180 days extension.