All Texas home insurance policies are divided into sections. These sections outline the level of coverage for property coverage, liability, what coverage is included, and what options may have been selected. Over the next few weeks, we’ll take a look at each of these. This week, we’ll focus our attention on property coverage.
There four core types of property coverage contained in most Texas home insurance policies. These are dwelling coverage, other structures, personal property or contents, and additional or extra living expenses.
Dwelling coverage is the amount of insurance on a home. There should be enough coverage to replace the home in the event of a total loss, which means the amount should include demolition of the existing structure, hauling the debris away to the dump, and rebuilding the home the way it was.
Most insurance companies utilize a replacement cost estimation system. Data about the home, such as square footage, number of stories, roof type, exterior wall type, kitchen grade, number and grade of bathrooms, floor covering, and more, is fed into the system which then calculates what the amount of coverage on the dwelling should be. The amount of coverage is usually different from the purchase price; it may be more or less. It will also usually differ from its taxable value.
The next three items usually are a percentage of the home’s dwelling value. Texas state insurance law requires home insurance companies set aside a percentage of the dwelling amount for other structures (sometimes referred to as detached or separate structures) which may include fences, tool or garden sheds, detached garages, swimming pools, and more. These structures are usually permanent, reside in the yard, but not connected to the main home.
The amount of coverage ranges from 10% to 20% of the home’s value. The amount of coverage for other structures can be raised, such as in the case of a nice swimming pool, tennis court, or cabana. However, the amount of coverage can’t be lowered, even if there are no other structures.
Personal property or contents coverage is what protects everything you move into the home including furniture, appliances, electronics, clothing, toys, dishes, etc. Every insurance company has a base level of coverage they provide with their policy. A few companies start with an amount of coverage that’s 40% to 50% of the home’s insured value, but most are in the 60% to 70% range. The amount of coverage can be raised if needed, but it can’t be lowered.
Additional living expenses or loss of use is coverage to protect you financially if something happens to the home and you can’t live there until the claim is resolved. This can be used to rent a hotel room for a night or several nights, if you experienced a major water leak. In the event of a major fire or damage from a tornado or hurricane, you may need to rent an apartment of house until the damages are repaired or the home is replaced. Most people can’t afford to pay both rent and their mortgage, so this coverage can be a financial life saver.
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