What you need to know about Home Insurance

Home Insurance 101

Are you looking for insurance on your home, condo, farm or ranch house?  If you’re in the market as a new homeowner with your first-time purchase or you have been in your house for years, Carter’s Insurance can help you find the right product and coverage for your budget.  Not all insurance policies are the same.  We make it simple to find the right product. 

A little background, the author of this article, Eddie Carter started his career in Austin Texas in 1983.  Over 38 years of insurance experience in the Austin metropolitan area and in the rural communities surround Victoria, Texas, Eddie Carter has seen many changes in the insurance market.  Eddie Carter lived through the mold crisis of 2001, more on that in a minute.

Before 2000, home insurance policies where heavily regulated by the Texas Department of Insurance.  Before 2000, you could call any agent in Texas and get a price for home insurance based on the Texas Department of Insurance, standardized policy the HO-B or Homeowners Broad form policy. Whew, that was a mouthful to say!  Before 2000 price was the only major policy difference.  An HO-B was an HO-B no matter what company you bought it from.  You were comparing the same coverage with every carrier.  A home insured for $200,00 was the same as the competitor’s policy.  The only differences was the price, the deductible and any optional coverages.  Optional coverages where very limited as well.

Everything changed in 2001. In June, Farmers Insurance Group lost a lawsuit for damages caused by mold. A Dripping Springs family won and was awarded $32 million in damages.  Farmers Insurance Group, citing increasing losses due to mold-related claims, notified its Texas agents on Nov. 9, 2001, that they could not renew HO-B policies as of Dec. 30, 2001!  The home insurance industry in Texas was in turmoil. Almost every insurance company in Texas stopped writing insurance for new clients.  It was hard to find coverage. Insurance carriers began to offer only limited coverage policies and did away with the broad HO-B policy to prevent being sued for mold damage!

For the next several years, coverage with all carriers was very limited, expensive and hard to find.  It wasn’t 2003 when Texas home insurance carriers started to be more creative and add more coverage to policies. What changed?  Policy forms.  The Texas legislature passed SB-14 which gave Insurance companies the ability to file and use their own policy forms.  Insurance companies were now able to be more creative and offer very different coverage from company to company.   As a result, today you can buy limited mold coverage again.  Today some policies include it limited coverage for access to damage under the slab.  We have even seen coverage in Texas for earthquake coverage.

How can we help you today? 
Purchasing homeowners’ insurance does not have to overwhelm you.  It does not matter if this is a new home purchase, you are refinancing an existing property, or maybe you want to update your current homeowners’ policy to better fit your needs.  Carter’s Insurance can help you navigate the many different options out there.  Simply put, insurance comes down to deciding what coverage is important and what items you want to cover.  Easy when you let us help!

How to get the best home insurance quote
By far, the best way to shop for any type of insurance is to use an independent agent. Independent agents work for you.  We do not work for the insurance carrier. Carter’s Insurance Agency, your local Independent Agency, represents many different insurance companies and brokers to ensure you have the best policy and best price.  We can give you multiple policy quotes.  As your agent, we are your advocate.  We answer your questions, and we give you unbiased advice.  Free – no strings attached.

How much do I need to insure my home for?
First let’s discuss home vs land.  Your land or the lot your house resides on will not get destroyed and therefore does not need to be insured. Often, we see lenders ask for consumers to insure the total cost of the home loan.  In the hot real estate market in Austin Texas, 1,500 square foot homes are selling for over $1,400,000.   Think about it like this.  If you insured this home for $1,400,000 you would be insuring it for $933 per square foot.  Crazy!  You must take the land value out of the equation. Insurance is designed to replace your home if you have a total loss.  If your house burns to the ground, what would it take to rebuild it?

Do you have enough insurance to rebuild?

Cost to rebuild a home is not the same as the market value of your home. Cost to rebuild is not the same as the value your taxing authority shows either.  Market value of a home can go up and down rather quickly.  Who remembers the bust of the dot.com bubble in Austin Texas between 1998 and 2000?  People were losing their jobs and banks were foreclosing on homes all over central Texas.  The suburbs of Leander, Cedar Park, and Round Rock were hit especially hard.  How did this affect home insurance value?  Homes could be bought for pennies on the dollar.  A $150,000 home a year earlier was selling for $75,000.  The value to insure a home stayed the same during this time.  Remember, the cost to rebuild is very different the cost you pay to buy a home.

We hear prospective clients say, “I only paid $200,000 for my home, why do I need to insure it for $300,000?”  Because insurance companies are contractually bound to rebuild your home up to the value of insurance purchased.  This is the rebuilding cost compared to market or tax value.  Between 1998 and 2000 you could buy a home much cheaper than you could rebuild it. 

How do you determine the cost to rebuild?
You could ask a local contractor what they would charge to rebuild your home. You could hire an appraiser to complete a replacement cost estimate for your home.  Insurance carriers today now have their own method of calculating the cost to rebuild your home, and it is FREE!  Insurance carriers today require agents to ask questions about your home and input the information into very sophisticated “replacement cost estimators” to calculate what it would take to rebuild your home. This is free when you request a quote from us.  You will find the cost to rebuild will vary slightly between insurance company A or insurance company B or insurance company C.  The value may be a little different but should be in the same general ball park. 

What about coverage for your Personal Belongings?
Home policies come with coverage for your personal property. This coverage is usually generous and more than enough.  We recommend you take time to photograph or video your personal property in the event something unfortunate happens like a theft or fire. There are many “extra coverage options” features to customize your policy and cover special items. High risk items like jewelry, cameras, computers, and firearms have maximum dollar limits of protection.  For a small extra charge, you can increase these limits.  You can even increase the policy limits of personal property to fit your unique needs.  We are here to help – just ask.

What does my Texas Home Insurance policy cover?

What are some of the home policy additional options you can buy?
Most insurance companies offer a basic policy that usually covers fire, lightning, hail, wind damage from tornadoes and hurricanes and other similar perils.  You’re fully protected right?  Not always, Ask us about ways you  can protect yourself against some of these other risks which be added to your policy or request higher than basic limits. Some basic examples are below.

  • Jewelry: Most insurance policies cover limited amounts of jewelry coverage if stolen.  You can increase this coverage.  You can also cover select jewelry items for the accidentally losing the item or even losing a diamond out of one of your favorite pieces of jewelry.
  • Guns and Firearms: You can increase your coverage for guns and firearms.
  • Identity Theft: What happens if your identity is stolen by online thieves? This is a newer coverage you can add to some, polices to help recover your stolen identity. It provides coverage for expenses, including help-line assistance and case management services.
  • Refrigerated Products: Provides coverage for loss to covered property stored in freezers/refrigerators. Some policies now can be enhanced to add coverage if you lose power in a storm.
  • Extra cost to evacuate: What if you are required to leave your home because of an impending storm in the Gulf?  Who is going to pay for you to stay somewhere else?  This is an optional coverage on some polices to help you pay for those expenses.
  • Home based business: Let us help you decide if you need to add more coverage or look for a stand-alone business policy to protect you.

Every insurance company today has optional coverages or enhancements. Talk to us about your needs and what is important to you.  We can help you protect your home and valuables.

What information do I need to start my home quote?
When applying for insurance, you will need to gather your current insurance policy as reference.  Insurance companies will need similar information as a lender would when applying for a home loan. We will gather this information with you confidentially.  We will need the full name of the owner(s) of the property or home, their date of birth and their social security number.

What if I buy an investment property?
Homes you buy to rent out need to be insured differently.  When you rent a house out to a full time tenant you do not need to insure the personal belongings.  Homes you rent out on AirBNB or VBRO do need to have the personal belongings insured.  Check with us on how to properly cover these special circumstances. 

My lender offers insurance should I buy it?
My Some lenders may provide you with an insurance quote, just remember, they may be biased due to their relationship with a carrier.  Remember we are independent insurance agents, and we represent many carriers not just one.  Remember we will shop and give you the best coverage and price for your needs. Click Here to begin your quote which you customize to fit YOUR needs.

What if I do not plan to live in my home?
If you are not planning to make this home your primary residence or decide to move out of your home, you need to let your insurance agent know immediately. Every insurance policy for home coverage has a vacancy clause.  If you move out, and the house is vacant, coverage for the home is reduced dramatically often to just minimum fire coverage only. You have options, but you need to notify your agent to discuss those options.

Vacant homes, short term rentals like AirBNB and VBRO are different than traditional homeowner insurance.  Coverage could be suspended, and claims denied if you do not let your insurance carrier know. 

Are you a business owner?  Entrepreneur? 
Homes used for business need special attention to ensure you have coverage when you need it.  Some policies include very limited coverage for a business.  We can discuss your needs and help make sure you have coverage to protect your home-based business.

We are here for you!
Click “Here” to begin your secure quote through multiple different insurance companies. We do not sell your information to third party vendors or bombard you with calls. Your quote request will be submitted to a local agent in our office.

Written by Eddie Carter, Managing Partner
Carter's Insurance Agency

Published August 11, 2021 

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