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Understanding Property Insurance: Coverage, Risks, and Policies in Texas

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This chapter explores fundamental principles of property insurance, emphasizing risks associated with property ownership, including losses from fire, water, and vandalism. It distinguishes between direct losses, such as property damage, and indirect losses, like living expenses during repair. The chapter also explains various Texas homeowners insurance policies (HO-A, HO-B, HO-C), coverage limits, and common exclusions. Additionally, it outlines factors influencing insurance premiums and the importance of additional coverages like flood and windstorm insurance.

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Understanding Property Insurance: Coverage, Risks, and Policies in Texas

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Presentation Transcript

  1. Chapter 19 Principles of Real Property Insurance

  2. Risks of Property Ownership • Loss of property due to fire, wind, water, vandalism or other hazards • Loss of use • Liability loss resulting from negligence in the use of the property • Financial loss, particularly the inability to make mortgage payments, as a result of disability or death of a wage earner

  3. Property Insurance • Direct Losses • Replace damaged property • Indirect Losses • Living or businesses expenses • Liability Insurance • Against injury lawsuits

  4. Texas Homeowners Insurance • Can buy policy for house only • OR coverage that includes: • Dwelling & additional buildings • Personal property • Liability ($25k - $1M) • Medical Payments for others • $500 - $5,000 • Loss of use – 20% of house insured value

  5. Types of Texas Homeowners Insurance Coverage • HO-A • Limited coverage for home & contents • HO-B • Replacement coverage for most types of damage except listed • HO-C • Most coverage • Most expensive

  6. Most Texas policies cover losses by: • Fire • Lightning • Vehicles • Aircraft • Vandalism • Theft • Explosion • Smoke • Wind • Hail • Water damage (sudden/accidental)

  7. Most Texas policies DO NOT cover losses by: • Flooding • Earthquakes • Termites • Animals • Wind/hail damage to landscaping • Normal wear/tear

  8. Other Texas Residential Policies • Renters • Personal property • Living expenses • Condo • Same as renters • Plus coverage for owner improvements • Townhouses • Individual policy OR • Part of association master • Mobile Homes • If no wheels or on foundation, regular policy • If wheels, Mobile Owners policy

  9. Cash Value vs. Replacement • Cash value • Payment of current market price • Replacement value • Pay for new (similar) item

  10. Other Types of Insurance • Flood insurance • Offered by National Flood Insurance Program • Lenders may require it • Hurricane & Windstorm Insurance • Texas Windstorm Insurance Association • If insurer won’t provide coverage • Earthquake insurance • Cheap in TX b/c of low probability

  11. Factors that Affect the Premium • Age of home • Condition of home • Replacement cost • Construction materials • Home location • Quality of local fire dept. • Your claim history

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