People who live in the counties along the Texas coast usually have a policy that’s unfamiliar to most homeowners in north Texas. In addition to home insurance, most homeowners in the coastal counties of Texas will also have a separate wind insurance policy. This policy specifically addresses damage to a home caused by high winds normally associated with a hurricane.
After Hurricane Katrina struck the Gulf Coast from Louisiana to the Florida panhandle, many Texas home insurance companies began to limit or exclude wind coverage from their home insurance policies. In cases where wind coverage was excluded from the home insurance policy, the homeowner was “forced” to purchase a separate wind policy from the Texas Windstorm Insurance Association or TWIA. Texas wind insurance policies protect the homeowner from wind damage of any kind, whether hurricane related or not, as well as hail claims.
Insurance companies contribute premium dollars to a pool of money administered by TWIA under the guidance of the Texas Department of Insurance. TWIA was established by a legislative mandate to provide wind and hail insurance for Texas Gulf Coast property owners in the event of a catastrophic loss such as Hurricane Ike.
There are two types of coverage that comprise a Texas wind insurance policy:
- There is coverage available for the dwelling itself
- There is also separate coverage available for the personal property or contents.
Like flood insurance (see http://188.8.131.52/~wiseinsu/an-introduction-to-flood-insurance/), these two types of coverage must be purchased together in order to fully protect both the property and its contents. If wind insurance coverage for the home is purchased without contents coverage and the contents are lost or damaged due to high winds, then there’s no coverage.
Most Texans are unaware of a piece of legislation passed in 2011 referred to as House Bill 3. It set up a process where the Texas Public Finance Authority will issue bonds on TWIA’s behalf if insurance claims from a catastrophic storm exhausted TWIA’s available funds. The bonds are to be funded by a surcharge on auto and property insurance policies to help pay windstorm claims if TWIA’s reserves are exhausted. This surcharge would be levied only on policyholders in Texas’ 14 coastal counties, as well as portions of Harris County.
As you can imagine, people living in Texas’ 14 coastal counties aren’t happy that the surcharge on property and auto policies would be levied exclusively on them. Many believe any surcharge imposed on TWIA’s behalf should be charged to all policyholders state-wide. The rationale is if one part of the state suffers a catastrophic event, then the whole state “pitches in.” Counties further inland such as Hidalgo and Travis have experienced wind damage and massive flooding from previous hurricanes.
Other people believe the burden of the surcharges should be carried exclusively by those in the coastal counties. The rationale is why should anyone inland pay help defray the cost to repay the bonds for people who choose to live in Texas coastal counties?
Ultimately, this will be decided by the Texas Legislature in the 2015 legislative session. What do you think the decision should be? Should the coastal counties carry the surcharge burden alone, or should we all pitch in? Share your thoughts, suggestions, or questions with me in the comments section of our blog or on our Facebook and Google + pages. I’d love to hear from you!