There are many things you should know before buying Texas Homeowners Insurance. Everyone is probably curious about the price they will pay and the amount of coverage they need, but for this article, we will tell you three things you might not realize about Texas homeowners insurance.
- How much will your Texas homeowners policy pay out? A Texas homeowners policy will pay out only up to the maximum limits of the policy. If you insure your home for $150,000 and it is destroyed by a tornado, the most you can collect to repair it is $150,000. If it actually will cost $200,000 to repair or replace, you are liable for the $50,000 difference. Therefore, you should seek out enough insurance coverage to be able to repair or replace your home and its contents at today’s current market prices. The one exception to this rule is if your house is destroyed by fire. In that case, Texas law requires the insurance company to pay the full amount to replace the home even if it exceeds the limits set by your homeowners policy.
- You need to insure your Texas home for at least 80% of the replacement cost. If your house is damaged but not destroyed, your Texas homeowners insurance policy will only pay a fraction of the total loss that you claim. Even if your house was insured for $100,000 and you suffered $30,000 in actual damage, if the replacement cost for your entire house is $200,000, you will have a very difficult time getting the insurance company to pay the complete amount for the repair.
- Personal property coverage may be inadequate. If you only have personal property coverage and not replacement cost coverage, insurance will only pay out the cash value of the covered claim. The cash value is the replacement cost of the property less the depreciation on that property. Things like furniture, bedding, and appliances rapidly depreciate even though they may be in perfectly good condition. If you have a bunch of five year-old furniture and it gets destroyed or stolen, you may only get about 25% of what those items cost when you bought them new. With replacement coverage, you will get a new mattress, new furniture, and new appliances at no cost to you. Replacement coverage is more expensive, but it also is much better coverage.