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Homeowner Coverage Concerns
Many times we find that people do not know exactly how their homeowners policy will cover them when they have a claim. Unfortunately, most policyholder's are not made aware of this until they are in the process of presenting a claim to their carrier for payment and/or reimbursement. This process may have an unpleasant outcome if the coverage provided by the policy doesn't meet the expectation of the policyholder. As everyone knows, it is too late at this point to think about making changes that may have provided the coverage you expected. This is why it is important to know what exposures our insurance policies cover as well as what out-of-pocket expenses we will be burdened with.

The Texas Standard Homeowners Policy was developed in the 1950's as one of the best "package" policies available to the public. It was designed to combine both property and liability coverage's in a single policy form with a single premium charge. It remained virtually unchanged until October 1990 when the "readable" Homeowners Policy was implemented. This policy was similar to formats used in other states with some coverage detail differences.

The typical homeowners insurance policy provides you financial protection in the event your home, including your personal property, is damaged or destroyed due to unforeseen or catastrophic events. It can also protect you from medical expenses and liability claims others bring against you as a result of personal injury or property damage caused by you or your family members. There are two basic types of homeowners coverage, 1) All Risk Policy – this policy offers broad protection that covers all perils unless specifically excluded. 2) Named Perils Policy – this policy is not as broad and only provides coverage for perils specifically named in the policy which also contains exclusions to those perils. Each of these policies offer different methods of repairing or replacing covered items as well as varying levels of coverage extensions. (i.e. Contents %, Loss of Use %, Food Spoilage limit, Water Back up of Sewer and Drains and Mold coverages etc.)

As some us have experienced after our recent storms, most companies do not cover wind driven rain damage. Some do, however, and it may be worth it to consider one that does.

One area buyers should be aware of is whether their homeowners policy pays claims based on the Replacement Cost of the item(s) or the Actual Cash Value. The insurance company's payment may be drastically reduced if Actual Cash Value basis is used. Replacement Cost pays all necessary expenses associated with replacing or repairing damaged property up to the policy limit, less the applicable deductible amount. Actual Cash Value factors in depreciation that has accumulated and pays you the cost to replace or repair damaged property, less this depreciation and less the applicable deductible amount. There are probably a number of homeowners that would have difficulty picking up the tab on the depreciation of their property.

Most standard homeowner policies have a Clause 1- Deductible which is typically applicable to perils such as windstorm and hail and Clause 2 – Deductible which is applicable to all other perils. Due to losses sustained in recent storms, some carriers have increased the wind and hail deductible percentages they charge as well as added additional special hurricane deductibles. Buyers should review their renewal policies so they are aware of any of these increases. Since some carriers "grandfather" current policyholders at a lower deductible percentage, caution should be taken when changing carriers. Making an ill advised change could cause you to have additional out-of-pocket expenses.

Another area of concern is the value/limit you insure your property for. Your policy may contain language that requires you to insure it for a minimum specified percentage of its replacement cost value. This is important since it could reduce the amount your insurance company pays you for your claim if this provision has not been met.

Most carriers have their own version of these policies and it is extremely difficult to do one comparison that is applicable across the board. If you have any questions or concerns regarding your homeowners policy, or any other insurance policy, we encourage you to contact your agent and get them to clarify for you. There is also an organization called the Office of Public Insurance Counsel that provides insurance counseling to the public. They have a great website at where you can get information pertaining to insurance as well as do a comparison of your specific homeowners policy.

We welcome any questions you may have regarding the above information. You can contact me at 281.570.2000 or visit our website at

This article was provided for informational purposes only and should not be considered in any way as legal advice.
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