Homeowners, Renters and Other Property Insurance Basics
ICT represents Property and Casualty insurers doing business in Texas, and there is perhaps no more core product our member companies provide than coverage for their customer’s homes and personal property.
You’ll need to check the coverages on your own policy for coverages specific to you, but generally home insurance is provided through a few different policy types:
If you own your home, chances are you have homeowners insurance. Lenders require coverage on homes they finance, and even those who own their homes outright see the clear value in maintaining proper coverage for their property. Homeowners insurance is broken down into coverage for the structure (usually called the dwelling amount), liability protection, and personal property coverage. There are many other coverages and endorsements available as well, depending on what insurance companies offer.
The dwelling amount covers the reconstruction cost of the home, or the amount the insurance company estimates it would cost to rebuild the structure should it be lost in a fire or other covered catastrophe. The reconstruction cost may not match the market value of the home – it could be more or less depending on a variety of factors. Depending on the policy form used to insure the house, the covered perils can vary, but typically all policies cover for risks such as fire, theft, vandalism, falling objects, etc. Most homeowners policies in Texas also provide coverage for wind and hail, although coastal counties may exclude that coverage (see TWIA, below). Many policies also provide limited water damage, although Flood Insurance is a separate coverage (also detailed below), and flood damages are excluded from most policies.
It’s important to understand your coverage and secure those policies that best protect you.
Dwelling/Fire Policy (Landlord Protection)
If you own a home as an investment property and rent it out to others, it must be insured differently than an owner-occupied property. Although the coverages are similar in scope and protection, the liability exposure is different and insurance companies underwrite these properties accordingly.
If you rent your home rather than own, a renter’s policy is the best solution. Much less expensive than homeowners, a renters policy generally provides coverage limited to Personal Property and Liability.
Texas Windstorm Insurance Association (TWIA)
Texans living along the Gulf Coast have unique insurance needs and solutions. Like many other states with similar coastal exposure, the State of Texas operates the Texas Windstorm Insurance Association, or TWIA. TWIA was established by the Texas Legislature in 1971 in response to regional market conditions following Hurricane Celia. Created as an insurer of last resort, it saw its policyholder numbers grow to hundreds of thousands since Hurricanes Katrina but has since seen a decline in numbers as private insurance companies are now writing over 59% of wind policies in addition to writing auto and commercial policies ensuring that coastal residents are protected from these catastrophic exposures. TWIA is governed by a nine-member board of directors.
Many people believe that damage from flooding is covered under their standard homeowners policy, but in most cases, that is not correct. Very few insurers in the US provide flood insurance coverage due to the hazard of flood typically being confined to a few areas. As a result, it is an unacceptable risk due to the inability to spread the risk to a wide enough population in order to absorb the potential catastrophic nature of the hazard. In response to this, the federal government created the National Flood Insurance Program, in 1968. Anyone residing in a community participating in the NFIP can buy flood insurance, even renters.
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