Your Questions Answered
Here are the answers to the most commonly asked questions about the process of protecting your investment. Learn what this coverage is and how providers determine premiums.
What is homeowners insurance?
This is a product that protects the structure and the personal belongings kept in it. Texas home insurance also has a liability component that will provide for your legal defense and any damages if a member of your household injures someone or damages another person's property. Typically, the plan also reimburses customers for the living expenses they incur while their houses are being repaired after experiencing a covered loss.
How do carriers determine premiums?
Insurers base premiums on the risk the policyholder and location of the dwelling represent. The risk policyholders represent is usually determined by their claims history and the claims history of the house. The liability the actual dwelling represents is calculated according to the claims frequency of the ZIP code in which the house is located. Your company will examine the number of thefts in your area as well as the likelihood your dwelling will suffer weather damage.
How do Texas coverage rates compare with those of the rest of the country?
According to the Insurance Information Institute (III), Texas consistently ranks first in the U.S. for premiums. Texas frequently experiences severe weather, such as powerful winds, tornadoes, hail, etc., which makes insuring dwellings in the state very risky for carriers. To offset this liability, providers charge more for their products than they do in other localities. Even within this locality, premiums can vary widely depending on your location.
What amount of coverage should I select?
The purpose of a policy is to pay for the replacement cost of your house in the event of a loss. Industry experts advise consumers to choose a policy that covers at least 80% of the total replacement cost of the house. You should not choose the amount of your policy based on your home's real estate value, as this may be less or more than what it would cost to rebuild your dwelling from scratch. Similarly, the real estate value includes the cost of the land on which it is built, which would not need to be repaired or replaced after a loss. For this reason, the real estate value often inflates the true replacement cost.
What if I can't qualify for a policy?
If traditional insurers classify you as too high of a risk to offer coverage, you can pursue high-risk coverage through your state's underwriting association. Most localities have what is called a FAIR plan for consumers who cannot obtain protection through traditional means. Contact the Texas department of insurance for more information.