Texas home insurance policies are divided into sections. The first section outlines four core property coverage items (see http://220.127.116.11/~wiseinsu/home-insurance-core-property-coverage/). Last week, we looked at the second section which outlines liability coverage, or coverage that protects you if something happens to someone in your home or on your property (see http://18.104.22.168/~wiseinsu/home-insurance-liability-coverage/). This week, we’ll continue this by looking at policy deductibles.
There are at least two deductibles on a Texas home insurance policy. One covers wind and hail, while the other covers all other perils. There are a few companies that automatically show a third deductible for hurricane, but most companies usually list this for homes along the Texas coast or in the counties that are adjacent to the coastal counties.
The deductible for wind and hail deals exclusively with damage to a home caused by wind (straight line or tornadic) and hail storms. Damage can be to the roof, windows, siding, gutters and downspouts, as well as to fences and other separate or detached structures. Hail claims are typically the most or second most common home insurance claim in Texas.
All other perils covers a number of claim types including fire, smoke damage, water leaks, theft, vandalism, falling objects, etc. If the policy type operates on a named peril basis, then the policy will provide a specific list of perils which are covered. If the peril is not listed, then this type of policy does not cover that specific loss. On the hand, if the policy is a broad form policy type, it’s will provide a list of exclusions; anything that’s not excluded is covered.
Hurricane deductibles only apply to Texas coastal counties, considered Tier 1, and adjacent counties, which are referred to as Tier 2. Hurricane coverage only comes into play when damage is sustained from a named hurricane storm. Tropical storms are usually covered under the wind and hail deductible if they are named.
The deductible is the amount of money the homeowner pays out of pocket first, before the home insurance policy contributes to the claim. Most Texas home insurance policies have a minimum wind and hail deductible of 1%, or 1% or the home’s insured value. If the home is insured for $200,000, then a 1% deductible means the homeowner will pay the first $2,000 of a claim and the policy will pay the rest of the claim.
The other perils deductible can be stated either as a percentage, such as 1% like the wind and hail deductible, or in a dollar amount. Dollar based deductibles usually start at $1,000 and go up to a maximum amount such as $5,000 or $10,000. Most insurance companies require the other perils deductible to be less than the wind and hail deductible. Hurricane deductibles are almost always written as a percentage with the minimum percentage being 1% or 2%. The highest percentage deductible most mortgage companies will accept is 5%. Over the last 10 years, I’ve written only one policy with a 5% deductible because most people don’t want to pay that much out of pocket.
There is a fourth deductible that crops up, and this usually applies to special items such as glass coverage or scheduled items. In these cases, the policy deductible drops from a percentage to a smaller dollar amount of $100, $125, etc. but only applies to things like broken windows (glass coverage) or lost or stolen items like jewelry, artwork, collectibles, etc.
What level of deductible is right depends on the homeowner and the level of money they are willing to pay out of pocket for a loss or claim. The higher the deductible, the lower the insurance policy premium or cost, while lower deductibles increase a policy’s cost. What deductible is right for you? Share your comments, questions, and experiences with us on our Google +, LinkedIn, and Facebook pages. I’d love to hear from you!