How do insurance companies decide on the rates for Homeowners Insurance?
Insurance companies file their rates with the Texas Department Of Insurance (TDI) but don’t need approval before using them. This system is called file and use. Texas law requires insurance companies to offer rates that are reasonable, adequate, not excessive to the risks for which they apply, and not unfairly discriminatory. If TDI determines that a company’s rates don’t meet these requirements, we may require the company to pay refunds to the policyholders it overcharged. Companies may appeal TDI’s decisions.
What coverages are included with homeowners insurance?
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.
What are the different types of policy coverages?
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 doesn’t include the value of your land. Ask your company if you aren’t 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.
What are some different types of home insurance policies?
- Renters Insurance – A landlord’s insurance doesn’t cover a renter’s personal property. Renters insurance covers your belongings, provides liability protection, and pays additional living expenses if a fire or other event stated in your policy forces you to move temporarily.
- Condominium Insurance – Condominium insurance covers your belongings, provides liability protection, and pays additional living expenses. It also covers damage to improvements, additions, and alterations to the condo.
- Townhouse Insurance – 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 doesn’t 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.
- Mobilowners Insurance – Mobile homes without wheels and resting on blocks or a permanent foundation may qualify for a homeowners policy. However, most mobile homes are insured by a mobilowners policy. A mobilowners policy is an auto policy that covers mobile homes used as residences. Mobilowners policies typically offer limited coverage.
- Farm & Ranch Insurance – Farm and ranch owners policies insure homes outside city limits on land used for farming and raising livestock. You can pay extra to get coverage for certain farm equipment and outbuildings.