What’s New in the Texas Homeowner’s Insurance Market?
Your Credit Affects Your Rate
A rate analysis by the Dallas Morning News and texasquotes.com shows that credit ratings are affecting homeowner’s insurance rates significantly. Texans who have low credit scores (usually people with lower income) are paying premiums over two times higher than their counterparts. Some of the largest insurance companies charge people with higher credit scores significantly less than the charge people with higher scores.
It is perfectly legal for set rates for insurance based on credit scores. They believe that people with lower credit scores represent a higher risk pool. The problem is the most economically disadvantaged people may not be able to afford homeowners insurance limiting their ability to buy a home or to protect their home.
July, 2015 Texas Homeowner’s Insurance Settlement
Farmers Insurance Group will have to return $84, 4 million dollars to their policy holders from a 2002 homeowner’s insurance court case involving price
A Travis County, Texas, district court has granted preliminary approval of a settlement with Farmers Insurance Group that will return $84.4 million to policyholders stemming from a 2002 homeowners insurance rate case.
Texas policy holders who fall within the settlement class will be receiving refunds in addition to the 6.8% reduction in the their insurance rates in 2002. The refunds will total $84.38 million collars.
Notices to the settlement class will be mailed within the next 60 days.
How Texas Homeowner’s Insurance Works for You
Texas homeowners insurance pays to repair or replace your home and personal property if they’re damaged in a way that is defined and covered by the insurance policy. When your property is damaged or destroyed by covered events, it is called “covered losses.”
Your insurance policy is a contract between you and the insurance company. In Texas, there is a Consumer Bill of Rights for homeowners and renters that can be found at the TDI.TEXAS.GOV.
Here are the types of coverage in a typical Texas insurance contract:
• Dwelling- Covers damages and destruction of your home for any covered loss
• Personal property- Cover personal items like clothing, appliances, or furniture if they are destroyed, stolen or damaged.
• Other structures- Covers any outbuilding or structure not attached to your home like a garage, shed, or fences. It will cover repairs or rebuilding.
• Loss of use- Covers you if you have to move out of your home temporarily because of a covered loss. It covers living expenses (housing, food or other essentials
• Personal liability- Covers legal issues that occur as a result of someone else’s injury or property damage. It will cover payment for your defense in court.
• Medical payments- If someone is injured on your property, this type of insurance provides coverage. It may pay the health care costs of anyone who may have been hurt on your property.
Homeowner’s insurance normally covers certain losses (covered losses) but exclude other kinds of losses.
Most policies cover theft, explosions, fire, water damage, vandalism, and civil commotion. Some cover weather losses depending on where you live.
Most policies don’t cover wind damage to trees, mold, wear and tear, flooding, earthquakes, insect damage, water damage caused by plumbing leaks, frozen pipes, and losses to your house if it sits vacant over the specified policy time period.
Good to Know
There is a difference between replacement costs and actual cash value
• Actual cash value- Amount it would take to replace property minus depreciation. Depreciation is the expected loss of value due to the age and use of the property. If you own a home that is destroyed and you have cash value, you may not have enough to rebuild.
• Replacement cost – Amount it takes to rebuild or replace a home at current market value. Your insurance company will walk you the process of determining this value.
Personal Property Coverage
Your insurance company will provide coverage for your personal property as a percentage of your home’s value. If you home is worth $200,000 and your policy covers 25%, then your personal property is valued at $50,000. This may be negotiable with your insurance company.
If you have very expensive jewelry or art, it might exceed the cap for the covered amount. You may have to buy additional covered for those items.
Personally property is almost always covered at the actual cash value of the item which has been destroyed, stolen or damaged.