March is here and that signals the arrival of the home buying season. It also means it’s time for me to take a revisit home insurance. Beginning with this post, I’ll outline the coverage found on a typical Texas home insurance policy before drilling down into the different areas of a home policy. The goal is to help new home buyers know what to look for when shopping for home insurance, as well has raise questions to consider they may not have thought of.
There are 10 broad coverage types outlined in a Texas home insurance policy, not including options. These include coverage on the home, personal property or contents (both on and off-site), other or detached structures, loss of use, medical, personal liability, foundation access, water leaks and backups, and finally policy deductibles.
Home Coverage: This is the amount of coverage on the home. It should be a replacement cost policy, meaning there is enough to coverage to cover demolition, debris removal, and rebuilding the home if a total loss occurs. The amount of coverage will probably be different from the purchase price of your home.
Personal Property: Everything the homeowner moves into their new home is covered under personal property or contents coverage. This includes furniture, clothing, dishes, cookware, electronics, appliances, lawn and garden equipment, and much more.
The amount of coverage provided varies by insurance company and typically ranges from 40% to 70% for the home’s insured value. Only you can determine whether this is enough. If not, request more coverage.
In addition, you’ll need to speak up if you have any items that need to be covered for their face value such as jewelry, artwork, antiques, etc. These items should be scheduled which protects them for their full value regardless of loss (in most cases).
Personal Property Off Premises: This coverage protects personal property that is not located in the home such as items in your car or in a storage facility. The base amount of coverage is usually 10% of the personal property coverage.
Other Structures: Coverage for other or detached structures applies to swimming pools, detached garages, fences and any other structure that is not attached to the primary home. The minimum amount of coverage required on Texas home policies is 10% of the home’s coverage, although some companies provide 20% as a standard offering.
Loss of Use: Loss of use provides funds to rent a temporary home while your primary home is being repaired or rebuilt resulting from a claim. This can be for a few days, weeks, months, or even a year.
Medical & Liability Coverage: Stuff happens and it sometimes happens in your home or yard. Medical and personal liability coverage are designed to protect you when people fall, get hurt, your dog bites a neighbor, etc. Medical coverage provides medical care for small things, as there’s $1,000 to $5,000 in coverage, while liability coverage protects the homeowner for bigger things since the coverage is for $100,000 to $500,000 or more.
Optional Coverage: There are a ton or coverage options on a Texas home insurance policy, however, the 3 most common I discuss with people are foundation coverage, water coverage, and sewer backup. I’ll cover these in greater detail in the coming weeks. The main thing to know now is these are almost always options. If you don’t see them on the quote, they are not there, so ask about them!
Deductibles: The deductible is the amount paid out of pocket by the home owner before the policy begins to pay. Texas home insurance policies have either two or three deductibles. The most common two are wind and hail, as well as all other perils (fire theft, water damage, etc.). Policies on homes along the Texas coast may also have a separate deductible for hurricane or named storms.
Most of these deductibles are a percentage of the home’s amount of coverage, either 1% or 2%, although I’ve seen as high as 5%. Some insurance companies do offer a dollar deductible for all other perils such as fire, theft, smoke damage, water leaks, etc. but all start with a 1% deductible for wind and hail claims.
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