|
Homeowners Insurance
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 information 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.
What Homeowners Policies Do and Don't Cover
Most Policies Cover Losses Caused By:
- Fire and lightning
- Aircraft & vehicles
- Vandalism and malicious mischief
- Theft
- Explosion
- Riot and civil commotion
- Smoke
- Windstorm, hurricane, and hail
- Sudden and accidental water damage
Most Policies Do Not Cover Losses Caused By:
- Flooding
- Earthquakes
- Termites
- Insects, mice or rats
- Freezing pipes while your house is unoccupied (unless you
turned off the water or heated the building)
- Wind or hail damage to trees and shrubs
- Losses to your house if vacant for more than 60 days or
more
- Wear and tear and maintenance
- 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
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.
The preceding information provided by the Texas Department
of Insurance.
return to Insurance | return
to Mortgage Library |
