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What is homeowners insurance?*

Homeowners insurance pays to repair or replace your home or personal property if it is damaged or destroyed. Your policy states the amounts the company will pay and what types of losses it will insure against (such as fires, storms and thefts).

It is important to know your policy limits and what's in your policy. Make sure you read your policy carefully and understand your coverages. There are exceptions and limitations as to what policies will pay. Some of the more common restrictions limit the coverage provided to you on jewelry, watches, cash and furs. Other restrictions include limits on firearms, business use equipment, computers, cash, imported rugs and carpets, collectable cards and comic books, watercraft and some policies limit the coverage on water leaks. This is not a complete list and the list varies from company to company. Please read your policy carefully or call us for help. 972-480-9900

Are there different types of policies?

Insurance companies in Texas may sell several types of policies with different levels of coverage. Three of the policy forms sold in Texas—the HO-A, HO-B, and HO-C—are standardized. This means that every company selling one of these policies must use the same policy language and provide the same coverages. Be aware that companies may charge different rates for the same type of policy.

Companies may offer policy forms different than the three types if they're approved by the state's commissioner of insurance. These policies may not be standardized and may provide varying coverages. Read your policy carefully to know exactly what coverages you have.

Some companies may sell multiple 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. Very common.

Following is a brief description of a few of the policies sold in Texas:

  • HO-A policies provide limited actual cash value coverage of your home and its contents. Only the types of damage listed in the policy are covered.

  • HO-A amended policies provide more coverage than the HO-A policy but less than an HO-B. For instance, HO-A amended policies may include replacement cost coverage and coverage of damage from sudden and accidental water discharges. Neither of these coverages is included in the HO-A policy. Coverages provided by HO-A amended policies vary by company.
  • HO-B policies provide replacement cost coverage for most types of damage, except those specifically listed in the policy as being excluded.

  • HO-3 policies are very similar to the HO-B. Not the same, but similar. Ask your agent for details.
  • Approved alternative policies offer varying levels of coverage and are different from one company to another. Companies can only sell alternative policies that are approved by the commissioner of Insurance. If you have an approved alternative policy or an HO-A amended policy, read your policy carefully to know whether it offers replacement cost coverage or actual cash value coverage.

Note about replacement cost, actual cash value and guaranteed or extended replacement cost:

  • 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 does not include the value of your land. Ask your company if you are not sure how much it would cost to rebuild your house.

  • Actual cash value is the replacement cost of your property minus depreciation. If your home is destroyed and you only have actual cash value coverage, you may not be able to completely rebuild.

  • Guaranteed or extended replacement cost offers the highest level of protection. A guaranteed replacement cost policy pays whatever it costs to rebuild your home as it was before the fire or other disaster--even if it exceeds the policy limit. This gives you protection against sudden increases in construction costs due to a shortage of building materials after a widespread disaster or other unexpected situations. It generally won't cover the cost of upgrading the house to comply with current building codes. You can, however, get an endorsement (or an addition to) your policy called Ordinance or Law to help pay for these additional costs. A guaranteed replacement cost policy may not be available if you own an older home.

Some insurance companies offer an extended, rather than a guaranteed replacement cost policy. An extended policy pays a certain percentage over the limit to rebuild your home. Generally, it is 20 to 25 percent more than the limit of the policy. For example, if you took out a policy for $100,000, you could get up to an extra $20,000 or $25,000 of coverage.

Even though a guaranteed/extended replacement cost policy may be a bit more expensive, it offers the best financial protection against disasters for your home. These coverages, however, may not be available in all states or from all companies.

Other Types of Policies

Most residential policies operate like homeowners policies, but with a few differences. If you live outside the city or in an apartment, condo, townhouse, or mobile home, you may want to consider the following types of polices:

  • Renters insurance. A landlord's insurance does not 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 from your rented home.
  • Condominium insurance. Condominium insurance matches the benefits of renters insurance, and also covers damage to improvements, additions, and alterations to the condominium unit.
  • 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 does not 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 qualify for a homeowners policy. However, most mobile homes are insured by a mobilowners policy. A mobilowners policy is actually an auto policy that covers mobile homes used as residences. Mobilowners policies offer extremely limited coverage.

*Disclaimer: The information on this website is believed to be accurate; however, please refer to your own policy details for complete information.