Shopping Smart Tips for Texans Purchasing Auto, Homeowners & Renters Insurance from the Texas Department of Insurance

Shopping Smart Tips for Texans Purchasing Auto, Homeowners & Renters Insurance

(April 2009)

Shopping for an insurance policy is similar to shopping for any major item. It’s best to compare companies and products to find the best price, quality, and customer service.

This publication provides tips that can help you reduce your premium and get a better deal on automobile, homeowners, and renters insurance.

Know Your Rights

All auto and homeowners policies in Texas must include a “Consumer Bill of Rights,” which explains your legal rights and responsibilities. Read it carefully. You can also view the Consumer Bills of Rights for both types of policies on the Office of Public Insurance Counsel (OPIC) website

www.opic.state.tx.us

Quick Tips to Help You Shop

Determine what coverages you want and need. For instance, if you have valuable car stereo equipment or if you need more than basic residential coverage for jewelry, collectibles, or other valuables, you may need endorsements that change or add coverage. Endorsements that add coverage will raise your premium.
Consider factors other than price, including a company’s financial rating and complaint index. The financial rating indicates a company’s financial strength and stability, and the complaint index is an indication of its customer service record.
Buy only from licensed insurance agents and companies. Most licensed companies must belong to a guaranty association that pays claims for its member companies that become insolvent. You can learn a company’s complaint history, financial rating from an independent rating service, and license status by calling the Texas Department of Insurance (TDI) Consumer Help Line at 1-800-252-3439 or by visiting our website at www.tdi.state.tx.us.
Ask several companies and agents for price quotes. When comparing rates, make sure they are for the same coverages. TDI publishes sample rate comparisons for auto and homeowners insurance. You can also compare auto, home, and renters sample rates online at www.helpinsure.com. You can also use the Shopping for Home Insurance Company/Policy Comparison Worksheet and the Shopping for Auto Insurance Company/Policy Comparison Worksheet to help you gather information about companies and the policies they offer.
Include independent agents in your search. Some agents only represent a single company or company group. Independent agents typically represent several companies and can give you multiple quotes at one time.
Answer questions truthfully when you apply for insurance or ask for a rate quote. Wrong information may result in an incorrect price quote, rejection of your insurance application, or cancellation of your policy.
Consider higher deductibles. Your policy probably will have deductibles. A deductible is the amount you have to pay out of pocket on your claim before the insurance company pays. The higher your deductibles, the lower your premium. Choose the highest deductibles you can afford.
Ask about discounts. Insurance companies may offer policy discounts that will lower your premium. Ask your agent what discounts the company offers.
Make sure you have uninterrupted coverage. Never cancel an existing policy until you get your new policy or a written “binder.” A binder proves you have coverage until the company issues your policy.
Don’t pay cash to an individual agent. Pay with a personal check or money order made out to the insurance company or agency. Get a receipt for your premium payment.
If a company turns you down, keep shopping. Different companies have different criteria for accepting customers.

Auto Insurance

If you drive in Texas, you must be able to pay for accidents you cause. Most Texas drivers buy auto liability insurance to meet this requirement. There are eight types of coverage in a typical auto policy:

Liability insurance pays the expenses of a person whose vehicle is damaged in an accident you cause. Expenses can include medical bills, car repair, and car rental. It covers accidents that are caused by you or anyone covered by your policy, including a driver operating your car with your permission. Texas law requires minimum coverage of $25,000 for each injured person, up to a total of $50,000 per accident, and $25,000 for property damage.
Collision coverage pays for damage to your car regardless of who caused the accident. The company will pay up to the actual cash value of your vehicle, minus your deductible.
Comprehensive coverage (physical damage other than collision) pays for damage to or loss of your car from causes other than accidents, such as hail, vandalism, flood, fire, and theft.
Uninsured/underinsured motorist (UM/UIM) coverage pays for your injuries and property damage caused by a hit-and-run driver or a motorist without liability insurance. UM/UIM also pays when your medical and car repair bills are higher than the other driver’s liability coverage.
Medical payments pays reasonable and necessary medical and funeral expenses if you, a family member, or a passenger in your car is injured or killed in a motor vehicle accident.
Personal injury protection (PIP) pays the same as medical payments coverage, plus 80 percent of lost income and the cost of hiring a caregiver for an injured person.
Towing and labor coverage reimburses you for towing charges when your car must be towed to a repair shop or other destination.
Rental reimbursement coverage pays a set daily amount for a rental car if your car is being repaired because of damage covered by your auto policy.

Make Sure Your Coverage Fits Your Needs

Don’t buy more coverage than you need. Compare the cost of your annual premium against your car’s Blue Book value, minus your deductible. If you’re paying more in premiums than it would cost to replace your car, consider dropping collision and comprehensive coverage. If you still owe money on your car, however, your lender will require you to maintain full coverage.

You may be able to drop some coverages and lower your premium. You may not need PIP and medical payments coverage if you have health and disability insurance. Remember, though, that PIP and medical payments also cover other people if they are injured while in your car. If you belong to an automobile club, you may already have towing and labor coverage and don’t need it in your policy.

Factors that Affect Your Premium

Companies may use a number of criteria to establish your premium, including:

Your age and, for younger drivers, your marital status. Male drivers under 25 and unmarried women under 21 have the highest rates. Drivers over 50 may get discounts.
Your driving record and claims history. A good driving record can save you money. If you have accidents or tickets on your driving record, you’ll have to pay more for insurance. Companies may add surcharges to your premium for major convictions, some driving violations, and accidents that result in property damage.
Where you keep your car. Because accidents and auto thefts occur more frequently in urban areas, rates are typically higher for people who live in cities than for those who live in rural areas.
The type of car you drive. Collision and comprehensive rates are highest for luxury, high-performance, and sports cars. Rates may also be higher for cars that damage easily or cost more to repair.
Your car’s primary use. Rates for cars driven solely for pleasure are lower than rates for cars driven to and from work or used for business.
Your credit score. Companies may consider your credit score when deciding whether to sell you a policy and at what cost. A company cannot refuse to sell you a policy or cancel or nonrenew your policy solely based on your credit.
Whether you drove uninsured in Texas. Companies may charge more if you drove uninsured in Texas for more than 30 days in the 12 months before you applied for insurance. A company cannot otherwise charge you more for liability coverage because of your prior lack of coverage, however.

Ask about Discounts

Ask your agent whether you qualify for any discounts the company might offer. The amount will vary by company. Following are some of the auto insurance discounts commonly available in Texas:

defensive driving and driver education courses for young drivers
students with good grades
a parent or family whose young driver is away at school without a car
airbags and automatic seatbelts
automatic daytime running lights
anti-lock brakes
two or more cars on a policy
driver age and annual mileage driven
policy renewal with good claims and driving records.

Homeowners Insurance

Insurance companies may sell several types of homeowners policies in Texas, each with a different level of coverage:

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. Coverage provided by these policies may 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 may only sell alternative policies that are approved in advance by the Commissioner of Insurance. Coverage may differ considerably from one company to another and from the coverage provided in the standardized Texas homeowners policies.

Read your policy carefully to know exactly what coverages are included. 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 buy additional coverage by adding endorsements to the base policy.

For a comparison of the policy forms approved for sale in Texas, visit the OPIC's website.

www.opic.state.tx.us

You can also use the Shopping for Homeowners Insurance Company/Policy Comparison Worksheet and the Shopping for Homeowners Insurance Checklist to help you shop.

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.

You should also consider insuring your home’s replacement cost, not its market value. The market value may be higher or lower than the cost to rebuild your home. If you have replacement cost coverage and your house is destroyed, you can rebuild your home on the same lot at current local construction costs. Construction costs change, so you should update your coverage amounts annually.

Companies use various methods to determine the estimated replacement cost of your home. Be prepared to answer questions about your home’s square footage, number of bedrooms, and number of bathrooms. Inform the agent of any custom features that are part of the house. Replacement cost does not include the land or landscaping features.

HO-A policies do not provide replacement cost coverage, but you may be able to add it with an endorsement for additional premium.

Household contents are automatically covered for their “actual cash value” only. Actual cash value is the replacement cost minus depreciation. You can buy replacement cost coverage for your personal property for an additional premium.

Homeowners policies offer limited coverage for valuables like jewelry, furs, cash, and stamp and coin collections. You can buy separate endorsements to increase your coverage.

Factors that Affect Your Premium

Your premium will be based on several factors. These include:

where you live
availability of local fire protection
age and condition of your home
construction materials used in your home (brick or frame)
your claims history
your credit score
the type of policy you purchase
the amount of coverage you buy.

Consider Higher Deductibles

Choose the highest deductible you can afford. Your deductible is the amount you must pay 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.

Texas homeowners policies generally carry a basic deductible of 1 percent ($1,000 on $100,000 of coverage) of the insured value of the dwelling. Deductibles are available as high as 5 percent and as low as $100, although not all companies offer deductibles that low.

Ask about Discounts

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. Following are some of the more common homeowners discounts available:

impact-resistant roof
noncombustible roof
burglar, fire, and smoke alarm systems
automatic sprinkler systems
fire extinguishers
premises in good condition (companies set their own standards)
age of house (companies set own standards)
marking personal property with an identifying number (inspection required)
good claims experience for three consecutive years
other policies with same company or group
house insured to full replacement cost
senior citizens discount.

Renters Insurance

Your landlord’s insurance will not cover your personal belongings in the event of a fire or theft. Renters insurance covers stolen, damaged, or destroyed household goods and personal property and also provides liability coverage.

There are two standard renters insurance policies:

The Broad Form (HO-BT) covers your personal property against events specified in the policy, such as fires and thefts.
The Comprehensive Form (HO-CT) protects your personal property for all events, unless specifically excluded by the policy.

Renters Insurance Coverages

Renters policies

normally pay only the actual cash value of your losses. Replacement cost coverage is available for an extra premium.
fully cover your personal property only at home. When traveling, your luggage and other personal items are protected up to 10 percent of the policy’s total amount of coverage.
automatically provide $25,000 of liability coverage in case someone is injured on your premises.
provide loss of use coverage that pays for additional living expenses, such as food and housing, if you must move from your home or apartment because of a covered loss.

Note: Renters insurance may duplicate other coverage. For instance, if you are still a dependent, your personal property may be covered by your parents’ homeowners policy. This coverage is limited, however, to an amount equal to 10 percent of the total personal property coverage provided by the policy.

Having Trouble Finding Insurance?

Texans having trouble finding homeowners insurance from licensed companies may have other options for obtaining coverage. The following programs may be able to help:

Helpinsure.com
Helpinsure.com is a free and secure service of TDI and the Office of Public Insurance Counsel to help Texans shop for automobile, homeowners, condo, and renters insurance. You can view sample rates for companies writing new homeowners insurance in your area, compare policy coverages, and view company “profiles” that show a company’s history, complaint index, and financial rating from an independent rating organization.

You can either contact companies yourself or complete a secure application that companies and agents can access to call you with a rate quote. For more information or to sign up, visit the Helpinsure.com website or call the toll-free number

1-800-252-3439
www.helpinsure.com

Texas Automobile Insurance Plan Association (TAIPA)
If you can’t find auto insurance from a licensed company, you might be able to buy coverage through TAIPA. TAIPA provides basic liability insurance, personal injury protection, and uninsured/underinsured motorist coverage to drivers rejected by insurance companies. TAIPA does not cover your car against theft, damage, or destruction.

TAIPA rates are higher than those of most standard companies, but may be lower than the rates charged by county mutuals for high-risk drivers. For more information, call TAIPA or visit its website

1-866-321-9154
www.taipa.org

Texas FAIR Plan Association
The FAIR Plan provides the standard Texas HO-A homeowners insurance policy form to qualified homeowners. To be eligible for coverage, you must have been denied insurance by at least two licensed insurance companies writing residential property insurance in Texas and may not have received a valid offer of comparable insurance from a company licensed in Texas. For more information, contact your agent or the Texas FAIR Plan

1-800-979-6440
www.texasfairplan.org

Surplus Lines Carriers
Consider a surplus lines company if you’re still unable to find insurance. Surplus lines companies are out-of-state companies not licensed in Texas, but legally eligible to sell insurance in the state on a surplus lines basis. Surplus lines companies generally charge more than licensed companies and often offer less coverage. In addition, there is no guaranty association to cover their claims if they become insolvent.

Before you buy a surplus lines policy, 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 explain rejections.

Your Rights Against Unfair Discrimination

An insurance company may not deny, refuse to renew, limit, or charge more for coverage because of your race, color, religion, or national origin.

A company also may not deny, refuse to renew, limit, or charge more for coverage because of your age, gender, marital status, geographic location, disability or partial disability, unless the refusal, limitation, or higher rate is “based on sound underwriting or actuarial principles.” This means the company must show valid evidence that you present a greater risk for a loss than others it is willing to insure.

In addition, a company may not discriminate between individuals of the same rate class and essentially the same risk in its rates, policy terms, benefits, or in any other manner unless the refusal, limitation, or higher rate is “based on sound actuarial principles.”

Consumer Complaints

If you believe an insurance company has treated you unfairly, first discuss your concerns with the company. Most companies have a toll-free telephone number to provide customer assistance. The number should be listed in your policy. If you’re unable to resolve the issue with the company, you may file a complaint with TDI’s Consumer Protection Division.

For More Information or Assistance

For answers to general insurance questions or for information on filing an insurance-related complaint, call the Consumer Help Line between 8 a.m. and 5 p.m., Central time, Monday-Friday, or visit our website

1-800-252-3439
463-6515 in Austin
www.tdi.state.tx.us

For printed copies of consumer publications, call the 24-hour Publications Order Line

1-800-599-SHOP (7467)
305-7211 in Austin

Help us prevent insurance fraud. To report suspected fraud, call our toll-free Fraud Hot Line

1-888-327-8818

To report suspected arson or suspicious activity involving fires, call the State Fire Marshal’s 24-hour Arson Hot Line

1-877-4FIRE45 (434-7345)

The information in this publication is current as of the revision date. Changes in laws and agency administrative rules made after the revision date may affect the content. View current information on our website. TDI distributes this publication for educational purposes only. This publication is not an endorsement by TDI of any service, product, or company.

For more information contact: