Many Texas homeowners are shopping for new property insurance in the wake of winter storm Uri. Between billions of dollars in storm damage, and skyrocketing materials, labor and fuel prices, Texas consumers are frustrated with their insurance companies and the claims they are receiving.
In some cases, homeowners have learned that certain types of storm damage aren’t covered by a standard homeowner’s insurance policy (like flood damage). While in other instances, even extended replacement cost coverage is not enough to completely rebuild damaged property thanks to supply chain hiccups and labor costs.
Today we will cover important terms Texas homeowners should know when shopping for insurance. We’ll also provide a general comparison of average prices and company ratings, to help consumers in “the Lone Star State” get the best quotes for homeowner’s insurance.
Homeowner’s Insurance Terms Texans Should Know
Here are a few key insurance phrases all Texas homeowners should grasp when shopping for insurance.
Actual Cash Value (ACV) vs. Replacement Cost Value (RCV) and Extended Replacement Cost (ERC)
ACV is the amount it would cost to replace a structure or its contents as it stands, today, including depreciation. Since one cannot build an old home, only a new structure, many customers are better served with a policy that covers complete replacement cost (RC), or even extended replacement cost – replacement cost plus a percentage like 10%.
Most of the time, when shopping for HO insurance, you will be provided a quote for a replacement cost or extended replacement cost policy. But not always. This is a key factor in your choice in homeowner’s insurance.
|Type of Insurance
|Actual Cash Value
|Extended Replacement Cost
|What it pays to rebuild a home
|The actual cash value of a structure at time of damage, less the deductible.
|The estimated cost to rebuild a home, up to policy limits and less a deductible.
|The estimated cost to rebuild, PLUS an allowance of 10% or 25%, less the deductible.
|What it pays to replace contents
|The depreciated value of an item
|The cost of a brand-new item
|The cost of a brand-new item, sometimes with an extra allowance
For instance, let’s imagine a Texas homeowner named Jules. During winter storm Uri, a tree limb struck his home, damaged a wall, roof and windows, and caused a lot of expensive water damage in the house. His living room carpets, furniture and flat screen TV all need to be replaced.
With an actual cash value policy, Jules gets a check that will barely cover his new wall and window. His carpet, TV and furniture are all considered “used,” so the claims adjuster values them at $1,000, $200 and $500, respectively. Jules will have a challenging time replacing all his furniture, carpeting and TV with only $1700.
If Jules has a replacement cost policy, he will be able to rebuild the wall and window. The claims adjuster feels he can get a new carpet, furniture and flat screen TV for $6,000.
And finally, if Jules has a standard extended replacement cost homeowner’s policy, his adjuster agrees to pay up to $6,600 to replace his storm-damaged belongings.
- In times of widespread catastrophe, like Uri, extended replacement cost policies provide the best coverage.
- That’s because local retailers and contractors: the people who will supply and install that new carpet and furniture, tend to increase their prices to match the high demand.
Hopefully, Jules had extended replacement cost coverage.
Meanwhile, where does Jules live while the home is repaired?
Living Expense Coverage / Additional Living Expenses (ALE)
It may be a while before Jules can move back into his home safely. When a major catastrophe strikes, contractors and professionals have a lot of work to do. Jules should expect to wait a few months until his repairs can be made.
In the meantime, Jules needs to find an apartment or other living arrangements, feed himself and his family, and so on. Some homeowner’s insurance policies will pay for these living expenses. In Texas, this coverage is called Additional Living Expenses (ALE).
ALE can be:
- A guaranteed amount set by the policy limits, like 10% of Coverage A (the value of the primary structure)
- Limited to a set term, like 12 months of living expenses but no more
Next, let’s compare three popular insurance companies in Texas. Remember, we do not speak for these insurers, but we scoured the internet for information about their prices and policies.
Comparing 3 Popular Texas Homeowner’s Insurance Companies
|Amica offers both standard HO insurance policies and extended policies with greater benefits like ERC and ALE, and catastrophic coverage.
|Amica is a mutual company, so insureds can receive dividends / discounts on their insurance bills, up to 20%.
|Offers extended policies with ERC and ALE and has many agents in Texas for customers who value the agency relationship.
|Progressive claims to offer meaningful discounts with multi-line bundles.
|State Farm provides both standard and extended policies. ALE is always included.
|Beyond extended replacement cost, State Farm offers inflation guard to help protect against inflation or skyrocketing costs of materials and labor.
As you see, every insurer works a little bit differently. If you’re ready to get a quote for homeowner’s insurance, gather your documents and consider which sort of policy you would prefer. Then it’s time to consider any additional endorsements / riders that will create your perfect policy.
Common Endorsements / Riders You Might Love
Every homeowner’s insurance contract is a unique agreement between the insurer and the homeowner. Insurers offer helpful extras, known as “endorsements” or “riders” – these terms mean the same thing – to help customize your policy and provide the coverage you need.
You will usually need to pay a little more for these added coverages, but the most common ones are:
- Jewelry or Art “floaters” – most homeowner’s policies have a very low limit on artwork or jewelry. If you own a $20,000 painting, or a $9,000 engagement ring that is lost in a house fire, know that a standard HO policy in Texas will not cover it, unless it is properly “scheduled.”
- Electronics or Musical instrument coverage
- Extra contents coverage – helpful if you have a garage full of valuable tools.
Ultimately, the best Texas homeowner’s insurance policy is one that blends affordability with coverage. Take your time and explore several options before deciding on a new insurer.