Purchasing a home is the biggest purchase the average American makes in their lifetime. It only makes sense that homeowners insurance is a common complimentary purchase. Homeowners insurance not only gives people peace of mind, but it also guarantees them a protection of their investment. Most people think homeowners insurance is the same in every state, but the reality is each state has different policies. Here is everything you need to know about homeowners insurance in Texas.
What is Covered by Homeowners Insurance in Texas?
There are six general situations that are covered by Texas homeowners insurance. Dwelling coverage handles any damage that is a result of a covered loss. Be careful here, as some homeowners insurance policies specifically exclude things like natural disasters that are common in the area. Personal property coverage takes care of any of your things that are destroyed by a covered loss, and also covers repairs for non-attached structures like sheds or garages.
Loss of use is a coverage designed to provide owners of homeowners insurance with supplemental funds to pay for living expenses when the occupant must move for repairs to take place. The final two coverage areas are personal liability and medical, which both cover costs associated with a person getting injured on the insured property.
This is the general gist of what’s covered by homeowners insurance in Texas, but it is important to remember that the specific amount of coverage for each category depends on the particular policy. As with everything in life, you get a better policy if you pay a higher premium.
The Two Types of Homeowners Insurance Policies
The two basic types of homeowners insurance policies are all-risk policies and named perils policies.
All-risk policies are the best choice for homeowners that want a broad and extensive coverage. These policies are much more expensive, but they provide homeowners with a true sense of security. On the other hand, named perils policies only cover what the customer chooses to pay for. This is much cheaper per month, but it does not offer the same extensive protection.
Two important concepts that pop up in both types of policies are replacement cost and actual cash value. Replacement cost is the complete cost it would take to repair your home. Actual cash value is what your house is worth at the time of damage. As a house gets older the value goes down. If your homeowners insurance policy just covers actual cash value, then you might have to pay out-of-pocket for some repairs.
Does an All-Risk Policy Cover Everything?
A grave misconception many homeowners have is that an all-risk homeowners insurance policy covers every single type of damage. The reality is that these policies often have language to specifically exclude certain types of damage. When it comes to Texas, natural disaster coverage is one of the biggest things that may be excluded from an all-risk policy. Two natural disasters generally not covered by homeowners insurance are floods and earthquakes.
Texas is a flat coastal state that is hardly above sea level. Flooding is a common occurrence, so general policies often exclude this damage. They chalk it up to a risk of living in such an area. Homeowners do have the option to buy specific insurance for things like flooding and earthquakes to ensure their peace of mind. Hurricane coverage depends on a county to county basis. An area in northern Texas is much more likely than an area on the Gulf coast to offer hurricane coverage.
Another thing not covered by an all-risk policy is pest damage. Any damage from things like termites, rats, and mice are seen as a result of owner negligence. Other issues that fall under owner negligence are natural wear and tear, water damage that results from continuous seepage, and mold damage. If the homeowner doesn’t maintain their home to protect it from these issues, then the insurance company believes these issues would not have occurred.
The final thought regarding all-risk homeowners insurance policies is to be aware of exactly what you are paying for when purchasing the insurance. It would be illegal for a an insurance company to omit language that excludes a type of damage for a policy they advertise as “comprehensive”. Anything they exclude is written in any document you sign and should also be communicated to you by your agent.
Since each state has its own unique issues, each state has differences in what their homeowners insurance policy covers. While the aforementioned information makes all-risk policies sound bad, the truth is these policies do cover a wide spectrum of events. Some of the things covered include sudden or accidental water damage, loss caused by aircraft or vehicles, damage done during a riot or civil unrest, vandalism, explosion, theft, lightning, fire, and sudden smoke damage.
The bottom line on homeowners insurance is that it is one of the biggest purchasing decisions any homeowner will face. Paying for the right homeowners insurance now can literally be a life-saver if the worst should happen. The most important thing to remember is that each state is different. By absorbing this information, you will unlock the toolkit for purchasing the best homeowners insurance in Texas.