Website SurveyHomeowners InsuranceTexas Homeowners Policies | What Homeowners Policies Do and Don’t Cover | Policy Dollar Limits | Coverage for Your Personal Property | Other Residential Policies | Other Types of Insurance You Might Need | Shopping for Homeowners Insurance | Understanding Rates | Having Trouble Insuring Your Home? | Losing Your Insurance | Your Rights Against Unfair Discrimination | If You Have a Claim | For More Information or Assistance | Glossary of Common Homeowners Insurance Terms (October 2008) 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 PoliciesYou 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:
Types of PoliciesInsurance 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:
To compare coverages for policies approved for sale in Texas, visit the Office of Public Insurance Counsel (OPIC) website What Homeowners Policies Do and Don’t Cover
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. Also read TDI’s Handling Water-Damage and Mold Claims publication. Policy Dollar LimitsIf 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 HouseThe 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 CoverageBuy 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 PropertyHO-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 PropertyMany 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
Other Types of Insurance You Might NeedFlood Insurance
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 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 plan to build, add to, or renovate a home or other structure and want TWIA coverage, you or your builder should request an inspection by a TDI windstorm inspector or a Texas licensed professional engineer appointed by TDI. Your agent can tell you how to get an inspection. For more information about windstorm coverage, contact TWIA
Note: Use the Homeowners, Flood, and Windstorm Policies Comparison chart to see the differences between homeowners, flood, and wind and hail insurance. Earthquake Insurance Extra Coverage (Endorsements) Personal Umbrella Liability Insurance Shopping for Homeowners InsuranceRates vary widely among companies, so it pays to shop around. The following useful tips can help you find the best deal for your money:
Understanding RatesTexas law requires rates for insurance offered in Texas to be reasonable, adequate, not excessive to the risks for which they apply, and not unfairly discriminatory. Residential property rates utilize a system called “file and use.” Under this system, companies file their rates with TDI, but they do not need prior approval to implement new rates. If TDI determines that a company’s rates are excessive, the company can be ordered to pay refunds to the policyholders it overcharged. Companies can appeal adverse rate decisions. A company can only change your individual premium at your policy renewal time. Factors that Affect Your PremiumCompanies 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 update them each time they make a change. The criteria companies typically use to establish premiums include:
DiscountsDiscounts 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 to its policyholders. Some of the more common discounts are listed below:
Having Trouble Insuring Your Home?If you are having difficulty finding a homeowners policy, it may be helpful to take steps to reduce your chances of a loss. Here are some things you can do: Remove Potential Risks Watch Out for Crime
Maintain Your House and Yard
Other Options for Insuring Your HomeTexans 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 homeowners, condo, renters, and automobile 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. The Helpinsure.com website also has a Learning Center with useful information about insurance. For more information or to sign up, visit the Helpinsure.com website or call the toll-free number
Texas FAIR Plan Association The Texas FAIR Plan Association provides the standard Texas HO-A homeowners insurance policy form to qualified consumers. To be eligible for coverage, a consumer 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, call TDI or contact the Texas FAIR Plan Association
Surplus Lines Carriers 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 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 InsuranceKnowing your rights can help 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. CLUE®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. Cancellation and NonrenewalCancellation 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 premiums paid in advance that did not buy coverage. This amount is called the “unearned premium.” 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 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. 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, except for 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 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 for deterioration of your property or if you file three or more nonweather-related claims in three years. A company may not nonrenew your policy for weather-related claims or for claims that were not paid or not payable under your policy. Exceptions:
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. Your Rights Against Unfair DiscriminationAn insurance company cannot deny, refuse to renew, limit, or charge more for coverage because of your race, color, religion, or national origin. A company also cannot 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.” Sound underwriting or actuarial principles means the company would have to show valid statistical evidence that your home presents a greater risk for a loss than other homes it is willing to insure. A company cannot unfairly discriminate between individuals of the same rate class and with essentially the same risk in its rates, policy terms, and benefits, or in any other manner unless the refusal, limitation, or higher rate is “based on sound actuarial principles. In addition, a company cannot refuse to insure a home based solely on its age or low value. Companies can offer discounts for newer homes and require updates to the wiring, plumbing, and heating systems before agreeing to insure an older home. If You Have a ClaimThe 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 explain its reasons in writing. Exceptions:
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
Claim TipsTo make the claim process run smoothly and to protect your rights, follow these steps:
Claim ProcessProof 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.
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. They are also prohibited from engaging in any activity that would be a conflict of interest. Should you choose to hire a public adjuster, make sure the public adjuster is licensed by TDI. To learn whether a public adjuster is licensed, call TDI’s Consumer Help Line or use the “Insurer Search” feature on TDI’s website. 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. If you believe that the company is delaying payment intentionally, contact TDI for help. 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 will issue the second check for the balance of your claim after it receives 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. Getting Help from TDICompanies are subject to penalties if they fail to settle claims promptly and fairly. If you believe an insurance company has treated you unfairly, first contact your company and try to resolve the problem. Most companies operating in Texas are required to have a toll-free telephone line to provide customer assistance. The number should be listed in your policy. If you are unable to resolve the problem yourself, contact TDI to file a complaint. You may file an insurance-related complaint with TDI several ways:
For More Information or AssistanceFor 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
For printed copies of consumer publications, call the 24-hour Publications Order Line
Help us prevent insurance fraud. To report suspected fraud, call our toll-free Fraud Hot Line
To report suspected arson or suspicious activity involving fires, call the State Fire Marshal’s 24-hour Arson Hot Line
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: |
Texas Department of Insurance Home Page · www.tdi.state.tx.us · Consumer Helpline: 800-252-3439
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