Homeowners insurance pays to repair or replace your house and personal property if they’re damaged or destroyed by an event or occurrence covered by your policy. These events or occurrences are called “covered losses.”
Note: An insurance policy is a contract between you and your insurance company. Read it carefully to understand exactly what it covers and the dollar limit of the coverage. You should also understand your rights. Texas has a Consumer Bill of Rights for homeowners and renters insurance. Your company must send you the Bill of Rights when you get or renew a policy.
Texas Homeowners Policies
Most homeowners policies in Texas include the following coverages:
- Dwelling pays if your house is damaged or destroyed by a covered loss.
- Personal property pays if the items in your house (such as furniture, clothing, and appliances) 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. Your policy will pay either a percentage of the amount of your dwelling coverage (typically 10 to 20 percent) or for a specific period after the loss (such as 24 months).
- 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. It might also pay for some injuries that happen away from your home, such as your dog biting someone at the park. A basic homeowners policy pays $500 in medical bills, but you may buy up to $5,000 in medical payments coverage.
Types of Policies
Insurance companies in Texas may sell several types of policies. If a company offers you a policy with less coverage than you’d like, ask if other policies are available. You may also be able to buy additional coverage by adding endorsements to your policy.
The two types of policies sold in Texas are
- All-risk policies (also known as a comprehensive coverage or open perils coverage). These policies offer you broad protection and cover all causes of loss unless the policy specifically excludes them.
- Named perils policies (also known as specified perils coverage). These policies offer narrower protection than an all-risk policy and cover only the causes of loss specifically named in 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 does not include the value of your land. Ask your company if you are not sure how much it would cost to rebuild your house.
- 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. If your home is destroyed and you only have actual cash value coverage, you may not be able to completely rebuild.
Companies may exclude coverage for certain losses. Even the most comprehensive all-risk policy will exclude certain types of damage.
Most policies will cover:
- Fire and lightning
- Sudden and accidental damage by smoke
- Vandalism and malicious mischief
- Riot and civil commotion
- Aircraft and vehicles
- Windstorm, hurricane, and hail (this coverage may be excluded if you live on the Gulf Coast)
- Sudden and accidental water damage
Most policies exclude:
- Termites, insects, rats, or mice
- Freezing pipes while your house is unoccupied (unless you turned off the water or heated the building)
- Losses if your house is vacant for the number of days specified by your policy
- Wear and tear or maintenance
- Wind or hail damage to trees and shrubs
- Mold, except what is necessary to repair or replace property damage caused by a covered water loss
- Water damage resulting from continuous and repeated seepage
Policy Dollar Limits
A policy’s dollar limits are the maximum amounts your insurance company is required to pay if your house is destroyed. The Declarations Page at the front of your policy shows your policy’s dollar limits. Review your limits to ensure you have enough coverage to rebuild if your house is damaged or destroyed. Talk with your agent or a company representative if you have any questions about your insurance 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. Some companies might 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) as a percentage of the amount of your dwelling coverage limits. For example, if your company insures your personal property at 40 percent of your dwelling coverage and your house is insured for $100,000, your items are insured for up to $40,000. You might be able to buy more coverage by paying a higher premium.
Homeowners policies usually cap the coverage amounts for certain types of personal property, such as jewelry and furs. Tell your agent or company about any special items you have that you’d like to insure. You may be able to buy additional coverage for these items for an extra premium.
Typically a homeowners policy will pay only the actual cash value of damaged, stolen, or destroyed personal property.
Inventory Your Property
Many people learn after a fire or storm that they didn’t have enough personal property coverage. Making a written 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. Use TDI’s Home Inventory Checklist to create your inventory.
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. You may be eligible to 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 may no longer change or buy windstorm coverage.
If you plan to build, add to, or renovate a home or other structure and want to get or maintain TWIA coverage, you must get a certificate of compliance (WPI-8) by having your property inspected during the construction phase. A TDI windstorm inspector can conduct an inspection for free, or you may use a Texas licensed professional engineer appointed by TDI. Ask your agent how to get an inspection. For more information about windstorm coverage, contact TWIA
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.
Local insurance agents sell NFIP flood policies and can tell you about the program in your area. For more information, call NFIP
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.
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.
Some of the most common endorsements expand or increase coverage for jewelry, fine arts, or camera equipment. Other common endorsements provide coverage for damage originally excluded by the policy.
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.
- Damage to foundation or slabs. Pays to repair a foundation or slab up to certain limits.
- 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.
- Mold remediation. Pays for mold remediation up to a certain amount.
- 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.
- Water damage from a plumbing, heating, or air conditioning system. Pays for sudden and accidental water damage. Most policies don’t provide coverage for continuous and repeated water damage.
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. Make sure the agent or company fully explains the coverage because policies are different from company to company.
Factors that Affect Your Premium
Companies use a process called underwriting to decide whether to sell you a policy and what rate to charge you. Each company must file its underwriting guidelines with TDI and send us updates if the guidelines change. Companies use various factors to determine premiums. These include:
- Your home’s age and condition. Companies may refuse to insure homes in poor condition, but they may not deny coverage solely because of a home’s age or value. However, most companies will charge you more if you are insuring an older house.
- Your home’s replacement cost. If you have a replacement cost policy, your policy will pay to rebuild your home if it is destroyed. Your premiums will increase in relation to the amount of your replacement cost.
- 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 in areas with a higher crime or high storm activity.
- Availability of local fire protection. Premiums are usually lower for homes in areas with access to good fire protection.
- Your claims history. Companies use your claims history to determine what to charge you for your coverage. Your claims history includes both the type and the number of claims filed.
- 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 because of your credit score. Companies that use credit scoring must file their credit scoring models with TDI. Learn more about how companies use credit scoring on HelpInsure.com. It’s a good idea to look at your credit score each year and to correct any errors.
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 it offers. Here are some of the more common things that companies offer discounts for
- impact-resistant or noncombustible roofs
- burglar, fire, and smoke alarms
- automatic sprinkler systems
- fire extinguishers
- age of house (companies set own standards)
- house and property in good condition (companies set own standards)
- house insured to full replacement cost
- good claims experience for three years in a row
- writing an identifying number on your personal property (inspection required)
- other policies with same company or group
- senior citizens discount.
Remove Potential Risks
You can make your home more insurable by taking care of the things that insurance companies and agents see as signs of potential risk. Look around your house 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.
Take Precautions against Crime
Since theft is a common cause of homeowners claims, some insurance companies might not be willing to insure homes that seem vulnerable to crime. Here are some things you can do to help you protect yourself and your property:
- Call the crime prevention officers of your local police department. They can inspect your home and tell you how to better protect 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 can give you some information to get started.
- Install a burglar alarm that calls the police or a security company.
- Eliminate hiding places for thieves and vandals. Keep trees and shrubs trimmed, especially around windows and entryways.
- Don’ park cars on the street. Cars parked on the street are tempting targets for thieves and vandals and, like overgrown shrubs, can be hiding places.
- Turn on outside lights at night.
- Write an identification number on your personal property to help identify it if it’s stolen.
Keep Your House and Yard in Good Condition
Someone from the insurance company will inspect your home when you apply for insurance. A cluttered yard and faded paint could suggest an unsafe home or existing damage. Insurance companies may charge you a higher premium, restrict or limit your coverage, or even refuse to insure you based on the company’s inspection. Take the following steps to improve your home’s safety and appearance:
- 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 and landscaping clean and trim.
- If your paint is peeling or faded, consider repainting.
Cancellation and Nonrenewal
Cancellation means either you or the insurance company stops coverage before your policy’s normal expiration date. If either you or the company cancels your policy, the company must refund any unearned premium. Unearned premium is the amount you paid in advance that did not buy coverage. For example, if you paid an annual premium of $600 and you cancel your policy after one month, the company owes you $550 in unearned premium.
A company must give you 10 days notice before it cancels your policy. A company may only cancel your policy within the first 60 days if it finds an undisclosed additional risk of loss that is not the subject of a prior claim. If a company cancels your policy in the first 60 days, it must give you 30 days notice.
A company may not cancel your policy after 60 days, unless there is fraud, increased risk, or nonpayment of premium.
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 it plans to nonrenew your policy or change your coverages. If the company does not notify you in writing in the required time, it must renew the policy at your request.
A company may nonrenew your policy if your property is in bad condition. It may also 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.
A company may also nonrenew your policy if you file three or more nonweather-related claims in three years. If your company doesn’t notify you after a second nonweather-related claim, it can’t refuse to renew your policy because of a third claim. A company can’t use the first two appliance-related claims to determine the number of nonweather-related claims for the purposes of nonrenewing your policy.
A company may not nonrenew your policy if you file a claim for a loss your policy doesn’t cover. 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 in the previous policy year.
If you move out of your house and it remains vacant for 60 days or longer, most policies automatically stop coverage. The policy’s liability coverages will continue, however. The vacancy also could cause the company to refuse to renew the policy when it expires. (http://www.tdi.texas.gov/pubs/consumer/cb025.html)