I’m buying my first home in Houston, Texas and I know I need to have homeowners insurance in place by the closing date. How do I know which company to use and how much coverage I need?
Your agent will help you figure out what coverages you need, and in what amount, and find the carrier with the homeowners insurance deal that is best for you. How much coverage you will need depends on a number of factors, beginning with the requirements of your mortgage holder. For example, depending on where your home is located you may be required to have flood insurance as a condition of your mortgage. The Office of Public Insurance Counsel (OPIC) provides a tool on its website that shows what specific coverages and are available from the insurance companies licensed to sell homeowners insurance in Texas. Check it out at www.opic.state.tx.us.
What homeowners insurance coverage am I likely to need?
Texas homeowners insurance typically is a bundle of coverages combined into one policy insuring your home and its contents and insuring you against liability. The basic coverages included in a homeowners insurance policy typically provide protection for:
- Damage to or destruction of your home or other structures, like a shed, fence, or detached garage, due to a covered cause
- Damage to or the theft or destruction of personal property inside your home
- The loss of use of your home, which pays for housing, food, and related expenses if you must temporarily live elsewhere because of a covered loss
- Personal liability in the event you are found legally responsible for an injury to someone while they are on your property, or for damage to their property
- Medical bills incurred by someone injured on your property
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What’s the difference between an all-risk policy and a named perils policy?
All Texas homeowners insurance policies fall into one of these categories, depending on whether they offer broad or narrower protection. As the name implies, all-risk policies offer protection from all causes of loss except those specifically excluded. All-risk policies are sometimes referred to as comprehensive or open perils policies. Named perils policies, which are sometimes referred to as specific perils policies, cover only the specific causes of loss named in the policy.
Does an all-risk policy cover damage from flooding?
Flood damage usually is not included in a Texas homeowners insurance policy, even under the broader protection afforded by an all-risk policy. If flood insurance is required by the terms of your mortgage, you will probably have to purchase separate flood insurance.
If my home or property is a complete loss, will my homeowners insurance pay enough for me to replace it?
That depends on whether your policy specifies replacement cost or actual cash value coverage. If you have replacement cost coverage, your homeowners insurance payment is based on the current cost to rebuild or repair your home (minus any deductible). This has nothing to do with the current market value of your home or the value of the land. Most homeowners insurance policies do not cover the full replacement cost of personal belongings.
Actual cash value takes into account the age of your home or property and how much it may have depreciated in value since you acquired it. The actual cash value is calculated by determining the replacement cost and subtracting the depreciation, then subtracting any deductible. With actual cash value coverage, your homeowners insurance may not pay enough to rebuild your home or replace personal property without you making up the difference out of your own pocket.
How much homeowners insurance do I need?
The price you pay for your Houston home reflects the value of both your house and the land it sits on. If the house were to burn to the ground, you would need to rebuild, but the value of the land remains the same. It’s the cost to replace the house that determines how much homeowner’s insurance you need. Most insurance companies require you to carry enough insurance to cover 80% of your home’s replacement cost, and some may require 100%. So the key to calculating the minimum amount of homeowners insurance you need is to determine how much it would cost to rebuild it from the ground up. As for your personal property, the amount of coverage is usually based on a certain percentage of the coverage on your home. You can usually increase the coverage for personal property by paying a little more. To make sure you have enough personal property coverage and to facilitate filing claims, it’s wise to inventory your belongings and keep a list, including purchase dates and prices if known, backed up with photographs.
How much will I pay for homeowners insurance in Houston, Texas?
Many factors enter into the calculation of homeowners insurance premiums, including (but not limited to) your home’s location, age, and type of construction, the amount of coverage desired, and personal information such as your age, credit rating, and prior claims history.
The Texas Department of Insurance has a webpage that allows you to compare sample rates from a number of insurance companies. You can access this tool at www.helpinsure.com.
Are there any discounts available for homeowners insurance?
You may be eligible for a discount when you buy both your homeowners and personal auto insurance from the same insurance company. Insurers typically offer other discounts for homeowners who take measures that increase the safety of their home and decrease the likelihood of a claim. For example, a protective device discount may be available if you have a security system, hard-wired smoke detectors, or an automatic gas shutoff valve. Some insurance companies offer other discounts based on such factors as your age and marital status.